- Gold price drifts lower for the second straight day amid reduced bets for aggressive Fed easing.
- Rising US bond yields continue to underpin the USD and exert some pressure on the XAU/USD.
- Geopolitical risks and China’s economic woes fail to lend support to the safe-haven commodity.
Gold price (XAU/USD) extends last week’s pullback from the $2,065 area, or a one-month peak and drifts lower through the first half of the European session on Monday. The downfall drags the precious metal to a one-week low, around the $2,022-2,021 area in the last hour and is sponsored by expectations that the Federal Reserve (Fed) will keep rates higher for longer, bolstered by Friday’s upbeat US NFP report.
The outlook, meanwhile, remains supportive of a further rise in the US Treasury bond yields, which assists the US Dollar (USD) to stand tall near its highest level since December 11 and contributes to driving flows away from the non-yielding Gold price. Meanwhile, persistent geopolitical risk stemming from conflicts in the Middle East and China”s economic woes fail to lend any support to the safe-haven XAU/USD.
The aforementioned fundamental backdrop favours bearish traders and suggests that the path of least resistance for the Gold price is to the downside. Market participants now look to the release of the US ISM Services PMI, due later during the early North American session. This, along with speeches by influential FOMC members and the US bond yields, will drive the USD and provide some impetus to the precious metal.
Daily Digest Market Movers: Gold price extends its decent amid reduced Fed rate cut bets
- The robust US employment details released on Friday forced investors to scale back their expectations regarding the timing and pace of rate cuts by the Federal Reserve, which is seen weighing on the Gold price.
- The headline NFP showed that the US economy added 353K new jobs in January, nearly double the 180K anticipated, and the previous month’s reading was also revised higher to 333K from the 216K reported.
- Other details revealed that the Unemployment Rate held steady at 3.7% and wage inflation, as measured by the change in Average Hourly Earnings, rose to 4.5% on a yearly basis as against the 4.1% rise anticipated.
- The probability of a rate cut in March dwindled to approximately 15% from over 65% last month, while the likelihood of a 150-bps rate cut in 2024 has also plummeted to just 25% from being nearly certain previously.
- The yield on the benchmark 10-year US government bond extends the post-NFP rise beyond the 4.0% threshold during the Asian trading hours on Monday and pushes the US Dollar to a fresh high since December.
- A private survey showed that business activity in China’s services sector remained in expansionary territory for 13 straight months, though grew less than expected in January and added to worries about a slowdown.
- Israel’s Prime Minister Benjamin Netanyahu said that the country will not end the war before it completes all of its goals, while media reports suggest that Hamas is set to reject the Gaza ceasefire deal proposed in Paris.
- US Central Command said forces conducted a strike in self-defense against a Houthi land attack cruise missile and struck four anti-ship cruise missiles prepared to launch against ships in the Red Sea.
- This, in turn, could act as a tailwind for the safe-haven precious metal as traders now look to the release of the US ISM Services PMI for short-term opportunities later during the early North American session on Monday.
Technical Analysis: Gold price bets could aim to test the $2,000 psychological mark
From a technical perspective, acceptance below the 50-day Simple Moving Average and a subsequent slide below Friday’s swing low, around the $2,028-2,027 region, could drag the Gold price to the $2,012-2,010 area. This is followed by the $2,000 psychological mark, which if broken decisively might shift the bias in favour of bearish traders and expose the 100-day SMA support near the $1,983-1,982 region. The XAU/USD could eventually drop to challenge the very important 200-day SMA, near the $1,965 area.
On the flip side, momentum beyond the Asian session peak, around the $2,042 region, is likely to confront a stiff hurdle near the $2,054-2,055 zone ahead of the $2,065 area or last week’s swing high. Given that oscillators on the daily chart are just holding in the positive territory, some follow-through buying has the potential to lift the Gold price towards the $2,078-2,079 region, or the YTD peak set in January. The subsequent move-up should allow the XAU/USD to reclaim the $2,100 mark and climb further to $2,020 resistance.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Pound Sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.01% | 0.12% | 0.06% | -0.01% | -0.06% | -0.13% | 0.07% | |
| EUR | -0.01% | 0.11% | 0.04% | -0.02% | -0.07% | -0.15% | 0.06% | |
| GBP | -0.10% | -0.10% | -0.06% | -0.15% | -0.19% | -0.22% | -0.04% | |
| CAD | -0.05% | -0.03% | 0.06% | -0.09% | -0.12% | -0.19% | 0.01% | |
| AUD | 0.01% | 0.05% | 0.15% | 0.09% | -0.04% | -0.10% | 0.10% | |
| JPY | 0.06% | 0.08% | 0.17% | 0.13% | 0.05% | -0.07% | 0.14% | |
| NZD | 0.14% | 0.16% | 0.26% | 0.21% | 0.13% | 0.08% | 0.21% | |
| CHF | -0.06% | -0.05% | 0.04% | -0.01% | -0.07% | -0.13% | -0.19% |
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
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.
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.
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.
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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- Source: https://www.fxstreet.com/news/gold-price-remains-depressed-as-usd-extends-post-nfp-gains-to-hit-two-month-peak-202402050426
