Gold price climbs further beyond $2,250, fresh all-time high amid June Fed rate cut bets

Source Fxstreet
Apr 1, 2024 04:41
  • Gold price advances to a fresh record peak amid rising bets for a June Fed rate cut.
  • The risk-on mood and a modest USD uptick do little to hinder the strong move up.
  • The overbought RSI on the daily chart warrants some caution for aggressive bulls.

Gold price (XAU/USD) scales higher for the fifth successive day on Monday and touches a fresh record high, beyond the $2,250 level during the Asian session. The US Personal Consumption Expenditures (PCE) Price Index released on Friday indicated that inflation increased moderately in February and reaffirmed bets that the Federal Reserve (Fed) will begin its rate-cutting cycle in June. This, in turn, is seen as a key factor benefitting the non-yielding yellow metal. Apart from this, geopolitical risks stemming from the protracted Russia-Ukraine war and conflicts in the Middle East lend additional support to the safe-haven commodity.

The aforementioned supporting factors, to a larger extent, overshadow the prevalent risk-on mood, which tends to undermine the Gold price. Even the emergence of some US Dollar (USD) dip buying does little to dent the underlying strong bullish tone surrounding the XAU/USD. This, in turn, validates Friday's breakout through the previous all-time peak, around the $2,223 area, and suggests that the path of least resistance for the precious metal is to the upside. Traders now look to the release of the US ISM Manufacturing PMI for some impetus, though the focus remains glued to the US monthly jobs data, or the NFP report on Friday.

Daily Digest Market Movers: Gold price continues to draw support from June Fed rate cut bets

  • The crucial US inflation data released on Friday keeps the door open for a June interest rate cut from the Federal Reserve and continues to drive flows towards the non-yielding Gold price.
  • The US Bureau of Economic Analysis reported on Friday that the Personal Consumption Expenditures (PCE) Price Index rose 0.3% in February, and the yearly rate edged up to 2.5% from 2.4%.
  • Excluding volatile food and energy prices, the core PCE Price Index – the Fed's preferred inflation gauge – rose by the 2.8% YoY rate as compared to January's upwardly revised reading of 2.9%.
  • Following the release, Fed Chair Jerome Powell noted that the latest US inflation data is along the lines of what we would like to see, reaffirming bets for an imminent shift in the Fed's policy stance.
  • According to the CME Group's FedWatch Tool, market participants are now pricing in around a 70% probability that the Fed will begin its rate-cutting cycle at the June monetary policy meeting.
  • Russia escalates attacks on Ukraine’s energy and other infrastructure in response to the recent Ukrainian long-range drone strikes on oil industry assets deep inside its territory.
  • Hamas says the Israeli military is committing a war crime by establishing so-called kill zones across the Gaza Strip where any approaching Palestinian may be shot and killed.
  • The global risk sentiment gets a boost from upbeat Chinese data released on Sunday, showing that business activity in the manufacturing sector expanded for the first time in six months.
  • This, along with a modest US Dollar uptick, might cap gains for the safe-haven precious metal as traders now look to the US ISM Manufacturing PMI for short-term impetus.

Technical Analysis: Gold price needs to consolidate before the next leg up amid overbought RSI

From a technical perspective, last week’s sustained breakout through the $2,200 mark and a subsequent strength beyond the previous record high, around the $2,223 area, was seen as a fresh trigger for bulls. This, in turn, validates the near-term positive outlook and suggests that the path of least resistance for the Gold price is to the upside. That said, the Relative Strength Index (RSI) on the daily chart is flashing overbought conditions. This makes it prudent to wait for some near-term consolidation or a modest pullback before positioning for any further appreciating move.

Nevertheless, the Gold price seems poised to climb further towards claiming the $2,300 round-figure mark. Meanwhile, any corrective pullback is more likely to attract fresh buyers near the $2,223 region. This should help limit the downside for the XAU/USD near the $2,200 mark, which should now act as a key pivotal point. A convincing break below the latter might prompt some technical selling and pave the way for some meaningful downfall in the near term.

 

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.

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Silver Price Forecast: XAG/USD finds support near $30.20 as investors digest hawkish FOMC minutesSilver price (XAU/USD) stabilizes near $30.20 after a vertical downfall in Thursday’s New York session.
Source  Fxstreet
Silver price (XAU/USD) stabilizes near $30.20 after a vertical downfall in Thursday’s New York session.
placeholder
Gold price surges above $2,400, eyeing all-time highsGold's price skyrocketed during the North American session ahead of the weekend as XAU/USD traded above $2,400, posting gains of more than 1.5% amid higher US Treasury bond yields.
Source  Fxstreet
Gold's price skyrocketed during the North American session ahead of the weekend as XAU/USD traded above $2,400, posting gains of more than 1.5% amid higher US Treasury bond yields.
placeholder
Gold price soars to three-week high amid easing inflation, rate cut hopesGold price extended its uptrend for the second straight day on Wednesday and hit a three-week high of $2,390 after data revealed by the US Bureau of Labor Statistics (BLS) showed inflation is ebbing, increasing the odds for a Federal Reserve (Fed) rate cut in 2024.
Source  Fxstreet
Gold price extended its uptrend for the second straight day on Wednesday and hit a three-week high of $2,390 after data revealed by the US Bureau of Labor Statistics (BLS) showed inflation is ebbing, increasing the odds for a Federal Reserve (Fed) rate cut in 2024.
goTop
quote