- Gold price remains confined in a narrow trading band held over the past three days.
- A softer risk tone and bets for a Fed rate cut in March 2024 continue to lend support.
- The USD stands tall near a two-week top and caps gains ahead of US NFP on Friday.
Gold price (XAU/USD) trades with a mild positive bias during the Asian session on Thursday, albeit lacks follow-through and remains confined in a narrow range held over the past three days. The weaker JOLTS Job Openings data from the United States (US) on Tuesday, followed by the softer ADP report on Wednesday reinforced expectations that interest rates may soon start to fall, dragging the benchmark 10-year US Treasury yield to its lowest level in three months. Furthermore, dovish rhetoric from European Central Bank (ECB) officials, the Reserve Bank of Australia’s (RBA) and the Bank of Canada’s (BoC) decision to hold rates steady on Tuesday and Wednesday, respectively, lifted hopes for a peak in rates globally. This, in turn, is seen as a key factor acting as a tailwind for the non-yielding yellow metal.
Meanwhile, evidence that the US jobs market is starting to slow fuels concerns about an economic downturn, which, along with the intensifying Israel-Hamas conflict, tempers investors’ appetite for riskier assets. This turns out to be another factor lending some support to the safe-haven Gold price. The upside, however, remains capped in the wake of the recent US Dollar (USD) rally to a two-week high, which tends to undermine demand for the XAU/USD. Traders also seem reluctant to place fresh directional bets and prefer to wait on the sidelines ahead of the US monthly employment data, or the Nonfarm Payrolls (NFP) report on Friday. In the meantime, traders might take cues from Thursday’s release of the US Weekly Initial Jobless Claims data for short-term opportunities later during the North American session.
Daily Digest Market Movers: Gold price struggles to attract any meaningful buyers despite a combination of supporting factors
- The weaker US employment data released this week reinforced expectations that the Federal Reserve is done raising interest rates and continues to act as a tailwind for the Gold price.
- The Labor Department’s JOLTS report showed on Tuesday that job openings fell to more than a 2-1/2-year low in October, signaling that interest rates were dampening demand for workers.
- The ADP report also pointed to signs of a cooling jobs market and indicated that private payrolls rose by 103K in November, down from the previous month’s downwardly revised reading of 106K.
- The current market pricing suggests a two-in-three chance of a rate cut by March, which has pushed down the US bond yields to a three-month low and further lend support to the XAU/USD.
- The mixed Trade Balance data from China showed that imports unexpectedly declined by 0.6% in November, fueling concerns about weak domestic demand amid looming recession risks.
- Israel launched the next phase of its ground offensive against the Palestinian group – Hamas – to the south of the Gaza Strip and intensified strikes around Gaza’s second-largest city, Khan Younis.
- The US Dollar manages to preserve its recent strong gains to a two-week high and holds back traders from placing aggressive bullish bets around the precious metal ahead of the US NFP report.
- The crucial US monthly employment details will influence the Fed’s near-term policy outlook, which, in turn, will drive the USD demand and provide a fresh impetus to the commodity.
- Traders now look to the US Weekly Initial Jobless Claims, expected to show that individuals filing unemployment insurance for the first time rose from 218K to 222K during the week of December 1.
Technical Analysis: Gold price setup remains in favour of bullish traders, the $2,000 psychological mark holds the key
From a technical perspective, the weekly swing low, around the $2,010-2,009 area, which coincides with a horizontal resistance breakpoint, might continue to protect the immediate downside ahead of the $2,000 psychological mark. A convincing break below the latter might set the stage for an extension of this week’s sharp retracement slide from the all-time peak and drag the Gold price to the $1,977-1,976 horizontal support. The corrective decline could get extended further towards the very important 200-day Simple Moving Average (SMA) currently near the $1,950 region.
On the flip side, the top end of a multi-day-old trading range, around the $2,035-2,038 area, is likely to act as an immediate strong barrier. This is followed by resistance near the $2,045 level, above which the Gold price could climb to the $2,071-2,072 area en route to the $2,100 round figure. Furthermore, the occurrence of a golden cross, with the 50-day Simple Moving Average rising above the 200-day SMA, suggests that bulls might eventually aim to retest the record high, around the $2,144-2,145 zone.
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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 1.16% | 1.28% | 0.85% | 2.27% | 0.26% | 1.53% | 0.88% | |
| EUR | -1.19% | 0.13% | -0.31% | 1.13% | -0.93% | 0.39% | -0.28% | |
| GBP | -1.32% | -0.12% | -0.43% | 1.00% | -1.03% | 0.26% | -0.40% | |
| CAD | -0.86% | 0.31% | 0.44% | 1.44% | -0.61% | 0.70% | 0.03% | |
| AUD | -2.32% | -1.14% | -1.02% | -1.46% | -2.08% | -0.75% | -1.43% | |
| JPY | -0.30% | 0.93% | 1.19% | 0.62% | 2.04% | 1.30% | 0.62% | |
| NZD | -1.56% | -0.38% | -0.26% | -0.69% | 0.75% | -1.29% | -0.66% | |
| CHF | -0.89% | 0.29% | 0.40% | -0.03% | 1.40% | -0.62% | 0.66% |
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).
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-extends-its-consolidative-price-move-as-traders-await-us-nfp-on-friday-202312070439