- Gold price attracts some follow-through buying for the second straight day on Thursday.
- The US bond yields and the USD extend the post-FOMC slide, lending support to the metal.
- The risk-on environment caps gains for the XAU/USD ahead of the central bank bonanza.
Gold price (XAU/USD) builds on the previous day’s solid recovery from the vicinity of the 50-day Simple Moving Average (SMA), around the $1,973 area, or over a three-week low and gains positive traction for the second successive day on Thursday. The Federal Reserve (Fed) signalled on Wednesday that it is done raising interest rates and the so-called “dot plot” indicated three 25 basis points (bps) rate cuts in 2024. Moreover, policymakers see inflation heading towards the Fed’s 2% target without a recession. The dovish shift led to a steep decline in the US Treasury bond yields and weighed heavily on the US Dollar (USD), providing a goodish lift to the non-yielding yellow metal.
The USD selling bias remains unabated through the Asian session on Thursday, though the prevalent risk-on environment caps the safe-haven Gold price near the $2,040 supply zone. Traders opt to move to the sidelines ahead of the latest monetary policy updates by the Swiss National Bank (SNB), the Bank of England (BoE) and the European Central Bank (ECB) later today. Apart from this, the release of the US monthly Retail Sales data might provide some impetus to the metal. Nevertheless, the fundamental backdrop supports prospects for a further appreciating move.
Daily Digest Market Movers: Gold price continues to draw support from the Fed’s dovish shift
- The Federal Reserve on Wednesday decided to keep interest rates at a 22-year high for the third meeting in a row and struck a more dovish tone in the accompanying policy statement.
- Policymakers see inflation getting closer to the 2% annual target without a recession and the fed funds rate peaking at 4.6% in 2024, down from September’s projection of 5.1%.
- Data released on Wednesday showed that the rise in average prices that businesses pay to suppliers decelerated to 0.9% in November, down from a 1.2% annual increase in October.
- The markets were now pricing in a nearly 60% chance that the Fed will begin to cut rates at its March meeting and the odds of a May rate cut stand at 90% versus 80% before the announcement.
- The benchmark 10-year US government bond yield tumbles to its lowest level since August and the yield on the rate-sensitive two-year Treasury note touches its weakest level since July.
- The post-FOMC US Dollar selling lends additional support to the Gold price, albeit the risk-on environment keeps a lid on any further gains ahead of the central bank bonanza on Thursday.
- The Swiss National Bank (SNB), the Bank of England (BoE) and the European Central Bank (ECB) will announce their policy decisions later today, which might infuse some volatility.
- Traders on Thursday will further take cues from the US monthly Retail Sales data, which consensus estimates pointing to a fall for the second successive month, by 0.1% in November.
Technical Analysis: Gold price seems poised to appreciate further, awaits a move beyond $2,040 supply zone
From a technical perspective, some follow-through buying beyond the $2,040 area will be seen as a fresh trigger for bullish traders. With oscillators on the daily chart holding in the positive territory, the Gold price might then climb to the next relevant hurdle near the $2,072-2,073 region. The momentum could get extended further and allow the XAU/USD to reclaim the $2,100 round-figure mark.
On the flip side, the $2,012-2,010 horizontal zone might now protect the immediate downside ahead of the $2,000 psychological mark. A convincing break below the latter will make the Gold price vulnerable and expose the 50-day SMA support, currently pegged near the $1,973-1,972 region. This is followed by the 200-day SMA, near the $1,950 area, which if broken will shift the bias in favour of bearish traders.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Pound Sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.25% | -0.22% | -0.34% | -0.84% | -0.97% | -0.83% | -0.44% | |
| EUR | 0.25% | 0.03% | -0.08% | -0.60% | -0.72% | -0.59% | -0.19% | |
| GBP | 0.20% | -0.03% | -0.11% | -0.64% | -0.81% | -0.64% | -0.22% | |
| CAD | 0.35% | 0.09% | 0.12% | -0.52% | -0.64% | -0.52% | -0.11% | |
| AUD | 0.85% | 0.60% | 0.62% | 0.51% | -0.13% | -0.01% | 0.40% | |
| JPY | 0.82% | 0.59% | 0.63% | 0.49% | 0.00% | 0.01% | 0.39% | |
| NZD | 0.86% | 0.58% | 0.62% | 0.50% | -0.03% | -0.14% | 0.39% | |
| CHF | 0.40% | 0.16% | 0.22% | 0.08% | -0.44% | -0.58% | -0.42% |
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-stalls-dovish-fed-inspired-rally-near-2-040-hurdle-bullish-potential-seems-intact-202312140349