- Gold price remains confined in a familiar range held over the past week or so.
- Reduced bets for an aggressive Fed policy easing cap the upside for the metal.
- Traders seem reluctant ahead of next week’s release of the US inflation figures.
Gold price (XAU/USD) continues with its struggle to gain any meaningful traction on Friday and remains confined in a familiar trading range held since the beginning of this week. The incoming stronger US macro data, along with hawkish remarks by a slew of influential FOMC members, suggested that the Federal Reserve (Fed) will keep interest rates higher for longer. This, along with an extension of the risk-on rally across the global equity markets, turns out to be a key factors acting as a headwind for the safe-haven precious metal.
The US Dollar (USD), however, extends its consolidative price move below its highest level in almost three months amid the uncertainty over the Fed’s rate-cut path. This is holding back traders from placing aggressive directional bets around the Gold price. Investors also prefer to wait for the release of the latest US consumer inflation figures next week, which might offer some clarity about the likely timing and the pace of rate cuts by the Fed in 2024. This will drive the USD demand and provide some meaningful impetus to the non-yielding yellow metal.
Daily Digest Market Movers: Gold price remains confined in a range as trader seek clarity on Fed rate cut path
- Robust US macro data and hawkish comments by Federal Reserve officials force investors to scale back their bets for steep rate cuts this year, which continues to act as a headwind for the non-yielding Gold price.
- Fed Chair Jerome Powell said on Sunday that the central bank can be prudent in deciding when to start easing on the back of a strong economy, smashing any remaining hopes for an interest rate cut in March.
- Adding to this, Richmond Fed Thomas Barkin said on Thursday that the central bank has time to be patient on rate changes and that he needs to see good inflation numbers being sustained and broadening.
- This assists the yield on the benchmark 10-year US government bond to hold above 4.0% and undermines the XAU/USD, though subdued US Dollar price action lends support and helps limit the downside.
- Market participants now look to the US consumer inflation figures due next week for cues about the timing and the pace of rate cuts this year, which, in turn, should provide a fresh directional impetus to the metal.
- The commodity, meanwhile, remains on track to register modest weekly losses, though remains confined in a multi-week-old trading range held since the beginning of this year, warranting caution for aggressive traders.
Technical Analysis: Gold price awaits breakout through short-term range before next leg of a directional move
From a technical perspective, the range bound price action points to indecision among traders over the near-term trajectory for the Gold price. Moreover, neutral oscillators on the daily chart warrant some caution before placing aggressive bets. In the meantime, the $2,022-2,020 area might continue to protect the immediate downside ahead of the weekly low, around the $2,015 region. Some follow-through selling will expose the $2,000 psychological mark, below which the Gold price could accelerate the slide towards the 100-day Simple Moving Average (SMA), currently around the $1,987 zone. The downfall could extend further towards the very important 200-day SMA, near the $1,966-1,965 region.
On the flip side, the weekly swing high, around the $2,044-2,045 area, is likely to act as an immediate barrier ahead of the $2,054-2,055 zone and the $2,065 region, or the monthly peak. A sustained strength beyond the latter has the potential to lift the Gold price back towards the YTD peak, near the $2,078-2,079 touched in January. The subsequent move-up should allow the XAU/USD to reclaim the $2,100 mark and climb further to the next relevant hurdle near the $2,120 region.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.10% | 0.09% | -0.03% | 0.21% | 0.62% | -0.96% | 0.84% | |
| EUR | -0.10% | 0.00% | -0.13% | 0.11% | 0.52% | -1.05% | 0.75% | |
| GBP | -0.10% | 0.00% | -0.13% | 0.10% | 0.52% | -1.06% | 0.73% | |
| CAD | 0.03% | 0.13% | 0.14% | 0.24% | 0.64% | -0.92% | 0.86% | |
| AUD | -0.21% | -0.11% | -0.11% | -0.24% | 0.41% | -1.17% | 0.62% | |
| JPY | -0.63% | -0.53% | -0.53% | -0.64% | -0.38% | -1.59% | 0.21% | |
| NZD | 0.94% | 1.04% | 1.04% | 0.91% | 1.15% | 1.55% | 1.77% | |
| CHF | -0.84% | -0.76% | -0.75% | -0.87% | -0.63% | -0.21% | -1.80% |
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).
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Source: https://www.fxstreet.com/news/gold-price-remains-confined-in-a-familiar-range-amid-fed-rate-cut-uncertainty-202402090418