Gold price sticks to intraday gains, remains below one-week high amid stronger US Dollar

  • Gold price catches fresh bids on Thursday and is supported by a softer tone around the equity markets.
  • The US Dollar builds on the overnight bounce from a two-month low and should cap gains for XAU/USD.
  • Bets that the Federal Reserve will not hike interest rates further could act as a headwind for the Greenback.

Gold price (XAU/USD) regains positive traction on Thursday and sticks to its modest intraday gains through the first half of the European session, albeit remains below a one-week high, around the $1,975-1.976 area touched the previous day. A softer tone around the US equity futures is seen as a key factor driving some haven flows towards the precious metal. Apart from this, expectations that the Federal Reserve (Fed) is done with its policy tightening campaign lends additional support to the non-yielding yellow metal.

That said, a further US Dollar (USD) recovery, from its lowest level since September 1 touched in the aftermath of the softer US CPI report on Tuesday, keeps a lid on any further gains for the Gold price. The US Retail Sales declined less than expected in October, which, along with an upward revision of the previous month's already stronger reading, suggested that the economy is on track for a soft landing. This continues to underpin the Greenback and warrants caution before placing bullish bets around the XAU/USD.

Daily Digest Market Movers: Gold price remains supported by dovish Fed expectations and a softer risk tone

  • The US Producer Price Index (PPI) registered its largest decline since April 2020 and fell 0.5% in October. Moreover, data for September was also revised down to show the PPI increasing by 0.4% instead of 0.5%.
  • This comes on top of the US CPI report on Tuesday, which showed that consumer inflation was cooling faster than anticipated, and strengthened expectations that the Federal Reserve is done hiking interest rates.
  • The headline US Retail Sales fell for the first time in seven months in October, though the decline was less than expected and was accompanied by an upward revision of the September data to show strong gains.
  • San Francisco Fed President Mary Daly, in an interview with Financial Times on Wednesday, underscored the uncertainty about whether the central bank has done enough to push consumer price back down to its 2% target.
  • This clouded the outlook for when the Fed will begin cutting interest rates, which is seen offering some support to the US Dollar and should contribute to keeping a lid on any meaningful appreciating move for the Gold price.
  • Mixed signals from high-level US-China talks temper investors' appetite for riskier assets and boost demand for traditional safe-haven assets, allowing the precious metal to build on its intraday ascent. 
  • Market participants now look forward to the US economic docket, featuring the release of Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Industrial Production figures for a fresh impetus.
  • Apart from this, speeches by influential Fed officials will be scrutinized for cues about the near-term policy outlook and further contribute to producing short-term trading opportunities around the XAU/USD. 

Technical Analysis: Gold price remains below the weekly high, around the $1,975-1,976 area touched on Wednesday

From a technical perspective, the one-week high, around the $1,975-1,976 area touched on Wednesday now seems to act as an immediate hurdle. A sustained strength beyond has the potential to lift the Gold price further towards the $1,991-1,992 hurdle en route to the $2,000 psychological mark. The momentum could get extended towards a multi-month peak, around the $2,009-2,010 region, which if cleared decisively will be seen as a fresh trigger for bullish traders and pave the way for a further near-term appreciating move.

On the flip side, the $1,955-1,950 area is likely to protect the immediate downside ahead of the 200-day Simple Moving Average (SMA), currently near the $1,935 region. This is closely followed by the 100- and the 50-day SMAs confluence, around the $1,928-1,925 zone, below which the Gold price could turn vulnerable and accelerate the fall towards the $1,900 round figure.


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   0.18% 0.25% 0.20% 0.68% 0.04% 0.81% 0.15%
EUR -0.18%   0.06% 0.01% 0.50% -0.14% 0.63% -0.04%
GBP -0.25% -0.06%   -0.04% 0.45% -0.20% 0.58% -0.10%
CAD -0.19% 0.02% 0.04%   0.47% -0.14% 0.62% -0.04%
AUD -0.68% -0.51% -0.44% -0.48%   -0.65% 0.13% -0.55%
JPY -0.03% 0.13% 0.19% 0.17% 0.65%   0.78% 0.10%
NZD -0.81% -0.63% -0.57% -0.60% -0.14% -0.78%   -0.67%
CHF -0.15% 0.05% 0.11% 0.07% 0.56% -0.11% 0.67%  

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).

Interest rates FAQs

What are interest rates?

Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

How do interest rates impact currencies?

Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.

How do interest rates influence the price of Gold?

Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.

What is the Fed Funds rate?

The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.

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