- The price of Gold recovers ground on Thursday due to the appearance of new sales around the Dollar.
- The Fed’s dovish expectations drag down US bond yields and put some pressure on the dollar.
- XAU/USD needs to break the $2,010 barrier for the bulls to take control in the short term.
The price of Gold (XAU/USD) attracts new buying on Thursday and reverses part of the previous day’s drop from near the monthly high. US Dollar (USD) halts FOMC minutes-inspired rally from its lowest level since August 31, near the 100-day SMA, amid near-zero likelihood of further rises Interest rates. Furthermore, current market prices indicate a greater than 50% probability that the Federal Reserve (Fed) will cut rates at the April 30-May 1, 2024 meeting. This, in turn, maintains the yield of the 10-year US government debt near its lowest level in two months, which is seen as weakening the dollar and acting as a tailwind for the underperforming yellow metal.
However, the precious metal remains below the psychological level of $2,000 in the early stages of the European session, justifying the bulls’ caution. Furthermore, recent repeated failures near the $2,010 horizontal barrier make it prudent to wait for strong follow-on buying before positioning for any further gold price appreciation moves. Traders may also refrain from opening positions. hawkish amid a relatively light session in the wake of the US Thanksgiving holiday. However, dovish expectations from the Federal Reserve (Fed) could continue to act as a tailwind for the XAU/USD, which suggests that any significant corrective dip could still be seen as a buying opportunity and is more likely to remain limited.
Daily Market Summary: Gold Price Maintains Intraday Gains, While Fed Rate Cut Expectations Spark Fresh Dollar Selling
- The recovery of the dollar, inspired by the FOMC minutes, is faltering due to expectations that the Federal Reserve (Fed) will not raise rates further.
- Policymakers reiterated the stance to keep rates higher for longer and remain committed to tightening monetary policy further if progress in controlling inflation falters.
- However, the current market valuation indicates a greater than 50% probability that the US central bank will begin cutting interest rates in May 2024.
- The Fed’s dovish expectations, meanwhile, overshadow Wednesday’s better-than-expected U.S. labor market and consumer sentiment data.
- The number of Americans filing new claims for unemployment benefits fell more than expected last week, to 209,000, the lowest level in more than a month.
- The University of Michigan’s consumer sentiment survey showed that American consumers’ inflation expectations rose for the second straight month in November.
- Other US data showed that orders for long-lasting US manufactured goods fell more than expected in October, pointing to a slowdown in economic demand.
- Lighter volumes due to the US Thanksgiving holiday and repeated failures ahead of the $2,010 level justify bulls’ caution.
- The emergence of fresh selling around the US Dollar helped the price of Gold regain positive traction during the Asian session on Thursday.
Technical Analysis: Gold price struggles to capitalize on its positive movement and remains below the $2,000 level
From current levels, any further move beyond the $2,000 level could continue to face strong resistance near the $2,007 area. Bulls will see a new trigger in follow-up buying leading to a subsequent break of the $2,009-$2,010 barrier, a multi-month high touched in October. Gold price could then accelerate the positive move towards the intermediate resistance of $2,022 en route to the next relevant hurdle near the $2,040 region.
On the other hand, the $1,989-$1,988 area is likely to protect the immediate decline before the $1,979-$1,978 region and the weekly low, around the $1,965 area. If these support levels are not defended, the price of Gold could retreat towards the 200-day SMA, currently around $1,940. This is closely followed by the confluence of the 50-day and 100-day SMAs, around the $1,933-$1,932 region, which if broken decisively could shift the near-term bias in favor of the bears.
Quote of the US dollar today
Below is the percentage change of the US Dollar (USD) against major currencies today.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.17% | -0.16% | -0.13% | -0.26% | -0.31% | -0.59% | -0.13% | |
| EUR | 0.18% | 0.03% | 0.03% | -0.08% | -0.14% | -0.40% | 0.05% | |
| GBP | 0.15% | -0.02% | 0.01% | -0.11% | -0.15% | -0.43% | 0.03% | |
| CAD | 0.14% | -0.03% | -0.03% | -0.15% | -0.16% | -0.45% | 0.01% | |
| AUD | 0.29% | 0.10% | 0.13% | 0.14% | -0.03% | -0.32% | 0.15% | |
| JPY | 0.31% | 0.15% | 0.15% | 0.18% | 0.04% | -0.30% | 0.19% | |
| NZD | 0.58% | 0.41% | 0.43% | 0.43% | 0.31% | 0.25% | 0.46% | |
| CHF | 0.12% | -0.05% | -0.04% | 0.00% | -0.14% | -0.18% | -0.46% |
The heat map shows the percentage changes of the major currencies against each other. The base currency is chosen in the left column, while the quote currency is chosen in the top row. For example, if you choose the euro in the left column and scroll down the horizontal line to the Japanese yen, the percentage change that appears in the box will represent EUR (base)/JPY (quote).
Frequently asked questions about Gold
Why invest in Gold?
Gold has played a fundamental role in human history, as it has been widely used as a store of value and medium of exchange. Today, aside from its brilliance and use for jewelry, the precious metal is considered a safe-haven asset, meaning it is considered a good investment in turbulent times. Gold is also considered a hedge against inflation and currency depreciation, since it does not depend on any specific issuer or government.
Who buys more Gold?
Central banks are the largest holders of Gold. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and purchase Gold to improve the perception of strength of the economy and currency. High Gold reserves can be a source of confidence for the solvency of a country. Central banks added 1,136 tons of gold worth about $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the largest annual purchase since records exist. Central banks in emerging economies such as China, India and Turkey are rapidly increasing their gold reserves.
What correlation does Gold have with other assets?
Gold has an inverse correlation with the US Dollar and US Treasuries, which are the main reserve and safe haven assets. When the Dollar depreciates, the price of Gold tends to rise, allowing 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 the price of Gold, while sell-offs in riskier markets tend to favor the precious metal.
What does the price of Gold depend on?
The price of Gold can move due to a wide range of factors. Geopolitical instability or fear of a deep recession can cause the price of Gold to rise rapidly due to its status as a safe haven asset. As a non-yielding asset, the price of Gold tends to rise when interest rates fall, while rising money prices tend to weigh down the yellow metal. Still, most of the moves depend on how the US Dollar (USD) performs, as the asset is traded in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold in check, while a weaker Dollar is likely to push up Gold prices.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
