- Gold price attracts some dip-buying on Thursday amid geopolitical risk and a softer USD.
- Reduced bets for an early Fed rate cut act as a tailwind for the buck and should cap gains.
- Traders now look to the US Q4 GDP print for some impetus ahead of the US PCE on Friday.
Gold price (XAU/USD) sticks to a mild positive bias heading into the European session on Thursday and for now, seems to have stalled the previous day’s downfall from the vicinity of the $2,040-2,042 supply zone. The US Dollar (USD) extends its sideways consolidative price move below its highest level since December 13 touched on Tuesday amid the uncertainty over the timing of when the Federal Reserve (Fed) will start cutting interest rates. This, along with persistent geopolitical tensions, lends support to the safe-haven precious metal.
Meanwhile, investors have been scaling back their expectations for a more aggressive Fed policy easing in 2024. This remains supportive of elevated US Treasury bond yields and holds back bulls from placing aggressive bets around the non-yielding Gold price. Market participants also seem reluctant and prefer to wait for the fourth-quarter US GDP growth figures, due later during the North American session, which will be accompanied by the release of Durable Goods Orders and the usual Weekly Initial Jobless Claims data.
The data might provide some impetus to the USD and produce short-term trading opportunities around the Gold price ahead of the US Personal Consumption Expenditures (PCE) Price Index on Friday. The crucial inflation data will play a key role in influencing market expectations about the Fed’s future policy decisions and determine the next leg of a directional move for the XAU/USD. In the meantime, it will be prudent to wait for strong follow-through buying before confirming that the precious metal has formed a near-term bottom.
Daily Digest Market Movers: Gold price struggles to attract any meaningful buying amid delayed Fed rate cut bets
- The US Dollar bulls remain on the defensive, which, along with geopolitical tensions stemming from conflicts in the Middle East, lend some support to the safe-haven Gold price.
- Iran-backed Houthi rebels in Yemen targeted two US-owned commercial ships sailing close to the Gulf of Aden on Wednesday in the face of multiple rounds of US military airstrikes.
- This comes after the US military carried out pre-emptive strikes against the Houthis to stave off what it said was an imminent attack on shipping lanes in the important Red Sea trade route.
- The S&P Global flash US Composite PMI Output Index increased to 52.3 this month, or the highest since June, suggesting that the economy kicked off 2024 on a stronger note.
- The flash US Manufacturing PMI rebounded from 47.9 to a 15-month high of 50.3 in January, while the gauge for the services sector climbed to 52.9, or the highest reading since last June.
- The data further pointed to a still-resilient US economy and forced investors to further pare their bets for a more aggressive monetary policy easing by the Federal Reserve in 2024.
- The yield on the benchmark 10-year US government bond hovers near the monthly peak, which should act as a tailwind for the Greenback and cap gains for the non-yielding yellow metal.
- The Advance US Q4 GDP print is due this Thursday and is expected to show that growth in the world’s largest economy slowed to a 2% annualized pace from 4.9% in the previous quarter.
- Thursday’s US economic docket also features the release of Durable Goods Orders and the usual Weekly Initial Jobless Claims, which might influence the Greenback and the XAU/USD.
- Apart from this, the outcome of the highly-anticipated European Central Bank meeting might infuse volatility in the markets and produce short-term trading opportunities.
- The market focus, meanwhile, will remain glued to the US Personal Consumption Expenditures Price Index data – the Fed’s preferred inflation gauge – on Friday.
Technical Analysis: Gold price manages to hold above the $2,000 mark, seems vulnerable to slide further
From a technical perspective, the recent repeated failures near the $2,040-2,042 supply zone and the overnight downfall favour bearish traders. Moreover, oscillators on the daily chart have just started gaining negative traction and suggest that the path of least resistance for the Gold price is to the downside. That said, it will still be prudent to wait for some follow-through selling below the $2,000 psychological mark before positioning for any further losses. The XAU/USD might then accelerate the slide towards the $1,988 intermediate support en route to the 100-day Simple Moving Average (SMA), currently around the $1,975-1,974 area, and the 200-day SMA, near the $1,964-1,963 region.
On the flip side, immediate resistance is pegged near the $2,025 zone, or the 50-day SMA, above which the Gold price could climb back to the $2,040-2.042 barrier. A sustained strength beyond the latter might trigger a short-covering rally and lift the Gold price to the $2,077 area. The momentum could extend further and allow bulls to aim back to reclaim the $2,100 round-figure mark.
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 .
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.01% | 0.03% | -0.07% | -0.02% | 0.07% | -0.04% | 0.16% | |
| EUR | -0.01% | 0.03% | -0.09% | -0.05% | 0.06% | -0.07% | 0.14% | |
| GBP | -0.04% | -0.03% | -0.11% | -0.07% | 0.02% | -0.10% | 0.12% | |
| CAD | 0.07% | 0.08% | 0.11% | 0.04% | 0.11% | 0.02% | 0.23% | |
| AUD | 0.03% | 0.03% | 0.05% | -0.05% | 0.10% | -0.03% | 0.19% | |
| JPY | -0.06% | -0.06% | -0.03% | -0.14% | -0.10% | -0.14% | 0.09% | |
| NZD | 0.09% | 0.05% | 0.08% | -0.02% | 0.03% | 0.13% | 0.19% | |
| CHF | -0.16% | -0.15% | -0.13% | -0.23% | -0.17% | -0.08% | -0.20% |
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.
Source: https://www.fxstreet.com/news/gold-price-languishes-near-weekly-low-ahead-of-us-gdp-geopolitics-lend-support-202401250315