Gold price remains within striking distance of two-week high ahead of US macro data

  • Gold price regains some positive traction on Tuesday, albeit lacks follow-through buying.
  • Sliding US bond yields undermine the USD and lend some support to the XAU/USD.
  • Geopolitical risks further benefit the safe-haven metal, though the upside seems limited. 

Gold price (XAU/USD) catches fresh bids following the previous day's modest downfall and remains well within the striking distance of over a two-week high touched last Thursday. The US Dollar (USD) remains on the defensive in the wake of a fresh leg down in the US Treasury bond yields, which, in turn, is seen as a key factor acting as a tailwind for the commodity. Apart from this, persistent worries about geopolitical tensions in the Middle East further seem to benefit the precious metal's relative safe-haven status. 

Any meaningful appreciating move for the Gold price, however, seems limited on the back of hawkish Federal Reserve (Fed) expectations. The FOMC meeting minutes released last week, along with several Fed officials, suggested that the US central bank will keep rates higher for longer amid sticky inflation and a resilient economy. This should act as a tailwind for the US bond yields and the Greenback, which, in turn, might hold back traders from placing aggressive bullish bets around the non-yielding yellow metal.

Market participants now look to the US macro data – Durable Goods Orders, the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index – for short-term opportunities later this Tuesday. The focus, however, remains glued to the US Personal Consumption Expenditures (PCE) Price Index on Thursday, which might provide fresh cues about the Fed's rate-cut path and provide a fresh directional impetus to the Gold price. 

Daily Digest Market Movers: Gold price remains well supported by sliding US bond yields and softer USD

  • The yield on the benchmark 10-year US government bond remains depressed near 4.275%, undermining the US Dollar and lending some support to the Gold price.
  • A recession in Japan and the UK, along with continued geopolitical tensions stemming from conflicts in the Middle East, further benefit the safe-haven precious metal.
  • US President Joe Biden said on Monday that he hopes to have a ceasefire in the Israel-Hamas war and a pause-for-hostages deal by Ramadan's beginning on March 10.
  • The FOMC meeting minutes released last week and comments by several Federal Reserve officials suggested that the US central bank was in no rush to cut interest rates.
  • Kansas City Fed President Jeffrey Schmid said that the US central bank should be patient and wait for convincing evidence that the fight against inflation has been won.
  • Markets have all but priced out the possibility of a rate cut in March and see around a 60% chance of the first 25 basis points rate cut coming at the June FOMC meeting.
  • Traders now look to the US macro data due on Tuesday – Durable Goods Orders, the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index.
  • Investors this week will also confront the release of the Prelim US Q4 GDP print on Wednesday and the Personal Consumption Expenditures (PCE) Price Index on Thursday.
  • The latter is considered the Fed's preferred inflation gauge, which, in turn, will influence expectations about future rate cuts and provide fresh impetus to the XAU/USD.

Technical Analysis: Gold price needs to clear the $2,041-2,042 barrier for bulls to seize near-term control

From a technical perspective, any subsequent move up is likely to confront some resistance near the $2,041-2,042 area, or over a two-week high touched last Thursday. Some follow-through buying will confirm a break through the 50-day Simple Moving Average (SMA) barrier and pave the way for additional gains. Given that oscillators on the daily chart have just started gaining positive traction, the Gold price might then challenge the next relevant hurdle near the $2,065 supply zone. The momentum could extend further towards reclaiming the $2,100 round figure mark for the first time since early December 2023.

On the flip side, the overnight swing low, around the $2,025 region, might continue to protect the immediate downside ahead of the 100-day SMA, currently near the $2,009 area, and the $2,000 psychological mark. A convincing break below the latter will shift the near-term bias in favour of bearish traders and drag the Gold price to the $1,984 region en route to the very important 200-day SMA support near the $1,967-1,966 zone.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Japanese Yen.

USD   0.00% 0.07% 0.05% 0.14% -0.05% 0.17% 0.00%
EUR 0.00%   0.07% 0.04% 0.14% -0.04% 0.15% -0.01%
GBP -0.06% -0.07%   -0.02% 0.08% -0.11% 0.09% -0.07%
CAD -0.04% -0.05% 0.00%   0.09% -0.10% 0.13% -0.05%
AUD -0.13% -0.14% -0.08% -0.11%   -0.19% 0.01% -0.15%
JPY 0.05% 0.05% 0.11% 0.09% 0.24%   0.20% 0.05%
NZD -0.17% -0.15% -0.11% -0.13% -0.02% -0.22%   -0.14%
CHF 0.00% 0.00% 0.07% 0.04% 0.14% -0.04% 0.15%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

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