- Gold price remains confined in a narrow trading band, though the downside remains cushioned.
- Bets for another 50 bps Fed rate cut in November cap the USD and offer support for XAU/USD.
- Geopolitical tensions further act as a tailwind ahead of speeches by influential FOMC members.
Gold price (XAU/USD) extends its sideways consolidative price move for the second straight day on Thursday and remains well within striking distance of the record high touched the previous day. Traders opt to move to the sidelines ahead of Federal Reserve (Fed) Chair Jerome Powell’s speech later today, which will be looked upon for cues about the pace of interest rate cuts going forward. This, in turn, will play a key role in determining the next leg of a directional move for the non-yielding yellow metal.
In the meantime, bets for another oversized interest rate cut by the US central bank fail to assist the US Dollar (USD) to capitalize on the previous day’s solid recovery from the vicinity of the YTD low. Apart from this, rising tensions in the Middle East and concerns over China’s economic recovery, despite the latest stimulus plans, act as a tailwind for the safe-haven Gold price. That said, slightly overbought conditions on the daily chart warrant caution before positioning for any further appreciating move.
Daily Digest Market Movers: Gold price bulls await Fed Chair Jerome Powell’s speech before placing fresh bets
- The US Dollar struggles to build on Wednesday’s strong recovery gains amid dovish Federal Reserve expectations, which, in turn, continues to lend some support to the non-yielding Gold price.
- Several Fed officials this week tried to push back against bets for a more aggressive easing, though the markets are pricing in a greater chance of a 50 basis points rate cut in November.
- Hence, Fed Chair Jerome Powell’s speech later this Thursday will be scrutinized closely for fresh cues about the future rate-cut path and to determine the near-term trajectory for the XAU/USD.
- The US macro data – the final Q2 GDP print, the usual Weekly Initial Jobless Claims, Durable Goods Orders – and speeches by other influential FOMC members should also provide some impetus.
- Meanwhile, the latest optimism led by a new round of Chinese stimulus measures announced this week fades amid doubts over its impact and worries about a global economic downturn.
- Moreover, investors remain concerned about the risk of a further escalation of geopolitical tensions and a broader conflict in the Middle East, offering support to the safe-haven precious metal.
Technical Outlook: Gold price could attract dip-buyers near $2,625, ascending channel throwback
From a technical perspective, the Relative Strength Index (RSI) on the daily chart is flashing overbought conditions and holding back bulls from placing fresh bets. That said, this week’s breakout through a short-term ascending trend channel suggests that the path of least resistance for the Gold price remains to the upside. Hence, the subdued range-bound price action might still be categorized as a consolidation phase before the next leg up.
In the meantime, dips towards the ascending channel resistance breakpoint, around the $2,625 region, could be seen as a buying opportunity and remain limited near the $2,600 mark. A convincing break below the latter might prompt some technical selling and drag the Gold price towards the $2,575 region en route to the $2,560 area and the $2,535-2,530 resistance-turned-support.
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.
Source: https://www.fxstreet.com/news/gold-price-consolidates-below-all-time-peak-awaits-fed-chair-powells-speech-202409260219