- Gold price drifts lower for the second straight day amid reduced bets for aggressive Fed easing.
- Geopolitical risks and China’s economic woes could lend support to the safe-haven commodity.
- The USD stalls ahead of the 100-day SMA and might contribute to limiting losses for the metal.
Gold price (XAU/USD) remains under some selling pressure for the second successive day on Monday and trades around the $2,030 area, down nearly 0.30% for the day heading into the European session. Investors further scaled back their expectations for a more aggressive policy easing by the Federal Reserve (Fed) following the stronger-than-expected release of the US monthly employment details on Friday. This remains supportive of elevated US Treasury bond yields and turns out to be a key factor undermining the non-yielding yellow metal.
The US Dollar (USD), however, faces rejection ahead of the 100-day Simple Moving Average (SMA) and for now, seems to have stalled the post-NFP positive move to its highest level since December 11, which, in turn, could lend support to the Gold price. Moreover, the risk of a further escalation of geopolitical tensions in the Middle East, along with persistent worries about slowing economic growth in China, keeps a lid on the recent optimism in the equity markets. This might further contribute to limiting the downside for the safe-haven XAU/USD.
Market participants now look forward to the release of the US ISM Services PMI, due later during the early North American session. This, along with the US bond yields, might influence the USD price dynamics and provide some impetus to the Gold price. Traders will further take cues from the broader risk sentiment to grab short-term opportunities around the precious metal. The aforementioned mixed fundamental backdrop, meanwhile, warrants some caution before positioning for a firm near-term direction.
- 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.
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).
Interest rates FAQs
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.
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.
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.
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.
