- Gold price edges lower and snaps a four-day winning streak to a three-month peak.
- Bets for a June Fed rate cut keep the USD bulls on the defensive and lend support.
- Geopolitical tensions could also help limit the downside for the safe-haven metal.
Gold price (XAU/USD rallied to a three-month peak on Monday and settled at an all-time high, above the $2,100 mark amid bets that the Federal Reserve (Fed) will start cutting interest rates in June. Apart from this, a further escalation of geopolitical tensions in the Middle East turns out to be another factor underpinning the safe-haven precious metal. Bulls, however, opt to take some profits off the table during the Asian session on Tuesday and wait for more cues about the Fed’s rate-cut path before positioning for any further appreciating move. Hence, the focus remains on Fed Chair Jerome Powell’s semi-annual congressional testimony on Wednesday and Thursday.
Apart from this, this week’s important US macro releases, including the closely watched Nonfarm Payrolls (NFP) on Friday, will play a key role in determining the next leg of a directional move for the non-yielding Gold price. In the meantime, subdued US Dollar (USD) price action, along with the prevalent cautious mood across the global equity markets, might continue to act as a tailwind for the XAU/USD. Nevertheless, the precious metal, for now, seems to have snapped a four-day winning streak. That said, the aforementioned fundamental backdrop warrants some caution before confirming a near-term top and positioning for any meaningful corrective decline.
- Friday’s disappointing US macro data, along with less hawkish comments by Federal Reserve officials, reaffirmed bets for a June rate cut and lifted the Gold price above the $2,100 mark on Monday.
- The US Dollar, meanwhile, remain on the defensive amid firming expectations for an imminent shift in the Fed’s policy stance, which, along with geopolitical risks, benefit the safe-haven metal.
- Israel conducted a counter-terrorism operation – the biggest in years – in the Palestinian administrative capital of Ramallah, raising the risk of a further escalation of tensions in the Middle East.
- Investors look to Fed Chair Jerome Powell’s two-day testimony for more cues on the path of interest rates and important US macro data to determine the next leg of a directional move for the XAU/USD.
- A rather busy week kicks off with the release of the US ISM Services PMI later this Tuesday, though the focus will remain glued to the closely watched US Nonfarm Payrolls (NFP) report on Friday.
- China’s Premier Li Qiang delivered the opening remarks at the National People’s Congress (NPC) annual meeting on Tuesday and said that the foundation of economic recovery is not solid yet.
- Earlier Reuters reported, citing an official work report, that China will target around 5% GDP growth for 2024, though it fails to boost investors’ confidence or provide any impetus to the XAU/USD.
From a technical perspective, the overnight strong move-up reaffirmed last week’s breakout through the $2,062-2,064 strong horizontal barrier and support prospects for additional gains. That said, the Relative Strength Index (RSI) on the daily chart is already flashing overbought conditions and makes it prudent to wait for some near-term consolidation or a modest pullback before the next leg up. Nevertheless, the Gold price remains on track to surpass the $2,020-2,025 intermediate hurdle and aim to retest the all-time peak, around the $2,144-2,145 zone touched early December.
On the flip side, the $2,100 round figure now seems to protect the immediate downside. Any subsequent decline might now be seen as a buying opportunity and remain limited near the aforementioned resistance breakpoint, now turned support, near the $2,064-2,062 region. That said, a convincing break below the latter might prompt some technical selling and drag the Gold price further towards the 50-day Simple Moving Average (SMA), currently pegged near the $2,037-2,035 region. The corrective slide could extend further towards the $2,020 area or the 100-day SMA.
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 Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.00% | 0.00% | 0.02% | 0.03% | -0.01% | 0.02% | -0.05% | |
| EUR | -0.01% | 0.01% | 0.01% | 0.01% | 0.00% | -0.01% | -0.03% | |
| GBP | 0.01% | 0.00% | 0.03% | 0.02% | 0.00% | 0.03% | -0.02% | |
| CAD | -0.02% | -0.03% | -0.03% | -0.03% | -0.03% | -0.02% | -0.05% | |
| AUD | -0.04% | -0.02% | -0.03% | 0.00% | -0.02% | -0.02% | -0.05% | |
| JPY | 0.01% | 0.02% | -0.02% | 0.04% | 0.00% | 0.03% | -0.03% | |
| NZD | -0.03% | -0.02% | -0.04% | -0.01% | 0.01% | -0.04% | -0.03% | |
| CHF | 0.04% | 0.03% | 0.03% | 0.06% | 0.07% | 0.03% | 0.06% |
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.
