- Gold price attracts buyers on Thursday and snaps a two-day losing streak from over a one-month low.
- A generally weaker risk tone offers some support to the safe-haven metal amid a modest USD downtick.
- Diminishing odds for a March Fed rate cut to act as a tailwind for the buck and cap any further gains.
Gold price (XAU/USD) sticks to its modest intraday recovery gains heading into the European session on Thursday and for now, seems to have snapped a two-day losing streak to over a one-month low touched the previous day. Geopolitical tensions due to persistent attacks by Houthi rebels in the Red Sea, along with worries about a weak economic outlook for China, continue to weigh on investors’ sentiment and lend some support to the safe-haven precious metal. Apart from this, a modest US Dollar (USD) downtick turns out to be another factor benefitting the commodity.
The USD downtick, meanwhile, could be attributed to some profit-taking following the recent run-up to its highest level since December 13 and is likely to remain cushioned amid reduced bets for an early interest rate cut by the Federal Reserve (Fed). The upbeat US Retail Sales released on Wednesday pointed to a resilient economy and provide the US central bank headroom to keep rates higher for longer. This remains supportive of elevated US Treasury bond yields, which should act as a tailwind for the USD and cap any meaningful upside for the non-yielding Gold price.
Hence, it will be prudent to wait for strong follow-through buying before confirming that the XAU/USD has formed a near-term bottom and positioning for further gains. Market participants now look forward to the US economic docket, featuring the release of the usual Initial Jobless Claims, the Philly Fed Manufacturing Index and housing market data. This, along with a scheduled speech by Atlanta President Raphael Bostic and the US bond yields, might influence the USD. Apart from this, the broader risk sentiment should provide some impetus to the Gold price.
Daily Digest Market Movers: Gold price benefits from geopolitical tensions, modest US Dollar downtick
- A modest US Dollar downtick, along with geopolitical tensions and China’s economic woes, assists the Gold price in attracting some buyers in the vicinity of the $2,000 psychological mark on Thursday.
- Yemen-based Houthi rebels claimed their second attack this week on a US-operated vessel in the Red Sea and have threatened to expand attacks in response to the American and British strikes.
- Pakistan undertook series of military strikes against terrorist hideouts in Sistan-Baluchistan province of Iran and said that it will continue to take all necessary steps to safeguard its people.
- China’s economy grew at an annual rate of 5.2% in the final quarter of 2023, more than the official 5% target, though investors remain concerned amid mounting deflationary risks and tepid demand.
- Data released on Wednesday showed that the headline US Retail Sales increased more than anticipated, by 0.6% in December, while core sales – excluding autos – also topped market estimates.
- The data points to still-resilient consumer spending and the underlying strength that the US economy possessed, which could provide the Fed more headroom to keep rates higher for longer.
- Furthermore, Fed Governor Christopher Waller said on Tuesday that the central bank should not rush to cut interest rates until it was clear lower inflation would be sustained.
- The yield on the benchmark 10-year US government bond holds comfortably above the 4% mark, near its highest level since December 13, and should lend some support to the Greenback.
- Traders now look to Thursday’s US economic docket – featuring the release of Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and housing market data – for a fresh impetus.
Technical Analysis: Gold price is likely to confront stiff resistance near 50-day SMA pivotal support breakpoint
From a technical perspective, the overnight breakdown through the 50-day Simple Moving Average (SMA) pivotal support was seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart have just started gaining negative traction and are still far from being in the oversold territory. This, in turn, suggests that the path of least resistance for the Gold price is to the downside. Hence, any subsequent move up might still be seen as a selling opportunity and runs the risk of fizzling out quickly near the $2,017-2,018 region (50-day SMA). That said, a sustained strength beyond might prompt some short-covering rally and lift the XAU/USD further towards the $2,042-2,045 horizontal resistance.
On the flip side, bearish traders might now wait for some follow-through selling below the $2,000 psychological mark before placing fresh bets. The Gold price might then accelerate the downfall towards the December monthly swing low, around the $1,974-1,973 region. The latter near the 100- and 200-day SMAs confluence, around the $1,970-1,964 area, which if broken decisively should pave the way for deeper losses. The XAU/USD might then weaken further towards the $1,955 intermediate support before eventually dropping to the November swing low, around the $1,932-1,931 region.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.12% | -0.10% | -0.10% | -0.20% | -0.06% | -0.22% | -0.05% | |
| EUR | 0.12% | 0.00% | 0.02% | -0.08% | 0.06% | -0.10% | 0.07% | |
| GBP | 0.12% | 0.01% | 0.02% | -0.07% | 0.07% | -0.10% | 0.08% | |
| CAD | 0.10% | -0.02% | -0.01% | -0.09% | 0.03% | -0.12% | 0.06% | |
| AUD | 0.18% | 0.08% | 0.08% | 0.09% | 0.14% | -0.03% | 0.15% | |
| JPY | 0.06% | -0.06% | -0.06% | -0.05% | -0.14% | -0.18% | 0.02% | |
| NZD | 0.24% | 0.11% | 0.12% | 0.12% | 0.03% | 0.16% | 0.18% | |
| CHF | 0.05% | -0.07% | -0.06% | -0.06% | -0.14% | -0.02% | -0.17% |
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).
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-stages-a-modest-recovery-from-one-month-low-bearish-potential-seems-intact-202401180357