Gold is trading in range in a calm market session with US data on sight


  • Gold price consolidates with the US Dollar steady near recent lows. 
  • The negative impact of hawkish Fed officials has ebbed.
  • The mild risk appetite, with investors looking at the end of rate hikes, is supporting Gold.

Gold (XAU/USD) has opened the week on a mildly positive tone, favoured by a moderate pullback on the US Dollar (USD) and the depressed US bond yields, which remain stuck at mid-term lows.

The precious metal, which is hovering right above $2,020 remains buoyed by increasing hopes that the global tightening cycle has come to an end. The effect of hawkish comments by Federal Reserve (Fed) officials on Friday, downplaying monetary easing hopes, has been short-lived and the USD is drifting lower again at the week’s opening,

Investors are now looking for more cues about the timing of the central bank’s first rate cuts, with their eyes on the US Q3 GDP figures, due on Thursday, and Friday’s US Personal Consumption Expenditures (PCE) Prices Index. These releases are likely to boost US Dollar volatility and might help the precious metal to define its near-term direction.

Daily Digest Market Movers: Gold consolidates with investors awaiting key US inflation data

  • Gold prices are looking for direction above the $2,000 psychological level, with the US Dollar still weighed by hopes of Fed cuts in early 2024.
     
  • New York Federal Reserve President John Williams dismissed the idea that the Fed has started to consider rate cuts and left the door open for further monetary tightening if needed.
  • Later on, Raphael Bostic, Atlanta Fed President and CEO, sided with his colleague, pushing back options of rate cuts until the second half of 2024.
     
  • Investors, however, remain confident that the Fed will start rolling back its restrictive monetary policies somewhat earlier. Futures markets are pricing a 67% chance of a 25 basis points (bps) cut in March.
     
  • Data from the Eurozone has shown that German business confidence deteriorated against expectations of an improvement in December, which strengthens the case of an economic slowdown anticipated by last week’s downbeat PMI figures.

Technical Analysis: Gold hesitates above $2,020 with broader bullish trend intact


The technical picture shows the precious metal supported above $2,000, yet intraday charts show a lack of clear direction, with the hourly and 4-hour RSIs practically flat near the 50 midline.

Bulls are missing confidence to attempt a retest to previous highs at $2,040 in a calm trading session on Monday, with investors awaiting more data to place significant bets. The broader trend, however, remains positive from the early October lows near $1,800. 

On the upside, the precious metal should breach the $2,040-$2,050 to convince bulls and extend towards the $2,065 area ahead of the all-time high at $2,150.

On the downside, Gold has important support at the $2,015-$2,020 area, where the confluence of the 50 and 100 SMAs in 4-hour charts meet the 50% Fibonacci Retracement of the October-December rally. Below here, bearish pressure would increase with the $1,977 support area coming into play.

 

US Dollar price in the last 7 days

The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the strongest against the Pound Sterling.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -1.39% -0.85% -1.64% -2.20% -1.48% -1.77% -1.38%
EUR 1.37%   0.53% -0.25% -0.80% -0.09% -0.37% 0.01%
GBP 0.85% -0.54%   -0.78% -1.34% -0.63% -0.92% -0.53%
CAD 1.62% 0.25% 0.77%   -0.55% 0.15% -0.12% 0.26%
AUD 2.16% 0.79% 1.32% 0.55%   0.70% 0.44% 0.81%
JPY 1.47% 0.09% 0.53% -0.16% -0.71%   -0.28% 0.10%
NZD 1.73% 0.37% 0.90% 0.12% -0.43% 0.27%   0.38%
CHF 1.35% -0.01% 0.52% -0.26% -0.81% -0.11% -0.38%  

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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