- Gold prices rise as US 10-year Treasury yield drops to 4.03%, enhancing the appeal of non-yielding assets.
- The New York Empire State Manufacturing Index shows weakness, but inflation expectations revised upward in September.
- Geopolitical tensions add to Gold’s safe-haven allure as investors brace for key US economic data later this week.
Gold prices advanced Tuesday as US Treasury bond yields retreated, capping US Dollar gains. A light economic docket featured the New York Empire State Manufacturing Index and the release of the NY Fed Consumers Expectations Survey. The XAU/USD trades at $2,664.
The New York Fed revealed the Empire State Manufacturing Index for September, which printed a dismal figure. Meanwhile, inflation expectations were upwardly revised in September, according to the latest NY Fed Consumers Expectations Survey.
The yield of the US 10-year Treasury note dropped eight basis points (bps) down to 4.03%, making the non-yielding metal more appealing while signaling increasing demand for US Treasury bonds.
Bullion prices extended their gains after bouncing off a daily low of $2,638, although the buck remains firm. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six currencies, is virtually unchanged at 103.25.
Aside from this, Federal Reserve (Fed) officials continued to grab the headlines. San Francisco Fed President Mary Daly said the Fed’s dual mandate risks are now in balance and that the labor market is not a source of inflation. She added that she’s cautiously optimistic about the economic outlook and foresees one or two rate cuts “if forecasts are met.”
The XAU/USD tends to fare well amidst times of geopolitical risks. Israel revealed that it would target military targets as retaliation against Iran and Hezbollah following the October 1 missile raid.
The Market’s attention turns to upcoming US Retail Sales, Industrial Production data, and Initial Jobless Claims due later this week.
Daily digest market movers: Gold price climbs as investors eye key US data
- The New York Empire State Manufacturing Index for October plummeted sharply to -11.9, missing the consensus of 2.3, well below September’s 11.3.
- The NY Fed Consumer Expectations Survey in September showed that inflation expectations for one year were unchanged at 3%, while for three years they edged up from 2.5% to 2.7%. For five years, inflation is forecasted to rise from the prior 2.8% to 2.9%.
- According to the CME FedWatch tool, traders see a 97.5% chance of a 25-basis-point cut in November.
- Data from the Chicago Board of Trade, based on the December fed funds rate futures contract, indicates that investors are pricing in 50 basis points (bps) of easing by the Fed in the last two months of 2024.
XAU/USD technical outlook: Gold price surges above $2,660, eyes on YTD peak
Gold price uptrend remains intact after climbing above the $2,660 area. Momentum is bullish, as shown by the Relative Strength Index (RSI). With the RSI aiming higher, this indicates that buyers remain in charge.
If XAU/USD clears the October 4 high at $2,670, it would pave the way to challenge the YTD high of $2,685, which is ahead of the $2,700 mark.
On the flip side, once Gold drops below $2,650, it would pave the way for further downside. The next key support level would be $2,600. A breach of the latter would expose the 50-day Simple Moving Average (SMA) at $2,555.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Source: https://www.fxstreet.com/news/gold-price-gains-despite-buoyant-us-dollar-as-us-yields-fall-202410152024