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    Gold price oscillates around 50-day SMA, seems vulnerable amid doubts over early Fed rate cut

    Source Fxstreet
    January 19, 2024 04:20
    • Gold price struggles to capitalize on the previous day’s recovery move from over a one-month trough.
    • Reduced bets for a March Fed rate cut put upward pressure on the US bond yields and caps gains.
    • Escalating geopolitical tensions underpin the safe-haven XAU/USD and should limit the downside.

    Gold price (XAU/USD) oscillates in a narrow trading range during the Asian session on Friday and remains well within the striking distance of over a one-month trough, around the $2,000 psychological mark touched earlier this week. Geopolitical tensions in the Middle East escalated further after Pakistan launched retaliatory airstrikes inside Iran on Thursday. This comes on top of US-Houthi clashes in the Red Sea, which, along with persistent worries about sustained economic weakness in China, acts as a tailwind for the safe-haven precious metal.

    Meanwhile, the US Dollar (USD) extends its sideways consolidative price move for the third successive day and turns out to be another factor lending support to the Gold price. That said, reduced bets for an early interest rate cut by the Federal Reserve (Fed) remain supportive of elevated US Treasury bond yields, which might continue to lend support to the USD and cap gains for the non-yielding yellow metal. This, in turn, warrants some caution for aggressive bullish traders and before positioning for any meaningful appreciating move for the XAU/USD.

    Daily Digest Market Movers: Gold price struggles to attract buyers amid mixed fundamental cues

    • The US-led forces continue to clash with the Iran-backed Houthi group in the Red Sea and seem to benefit the safe-haven Gold price amid a subdued range-bound price action around the US Dollar.
    • Houthi rebels in Yemen launched two anti-ship ballistic missiles at a US-owned, Greek-operated tanker ship on Thursday and the US, in response, carried out its fifth strike against Houthi targets.
    • Pakistan undertook a series of military strikes against terrorist hideouts in the Sistan-Baluchistan province of Iran, while the latter began a planned air defense drill from its port of Chabahar near Pakistan.
    • The USD consolidates below its highest level since December 13 touched earlier this week, though reduced bets for a March rate cut by the Federal Reserve continue to act as a tailwind.
    • The incoming resilient US macro data released this week suggested that the economy is in good shape and gives the central bank headroom to keep interest rates higher for longer.
    • Against the backdrop of the upbeat US Retail Sales figures on Wednesday, data released on Thursday showed that the Initial Jobless Claims fell to the lowest level since September 2022.
    • The markets were quick to react to the strong labor-market report and are now pricing just over a 50% chance of a rate cut at the March FOMC meeting, down from 75% a week ago.
    • The yield on the benchmark 10-year US government bond touched its highest level since mid-December, which favours the USD bulls and should cap gains for the non-yielding yellow metal.
    • Traders now look to the US macro data – the Preliminary Michigan Consumer Sentiment and Inflation Expectations, along with Existing Home Sales – for short-term opportunities.

    Technical Analysis: Gold price bears might wait for a break below $2,000 before placing fresh bets

    From a technical perspective, the lack of follow-through buying beyond the 50-day Simple Moving Average (SMA) suggests that the selling bias is still far from being over. Furthermore, oscillators on the daily chart have just started gaining negative traction and suggest that the path of least resistance for the Gold price is to the downside. Hence, any further move up might still be seen as an opportunity for bearish traders and runs the risk of fizzling out rather quickly near the $2,040-2,042 static resistance. Some follow-through buying, however, might trigger a short-covering rally and lift the XAU/USD towards the $2,077 area en route to the $2,100 psychological mark.

    On the flip side, bearish traders might now wait for a sustained break below the $2,000 round figure 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 $1,971-1,963 area, which if broken decisively should pave the way for deeper losses towards the $1,955 intermediate support. The XAU/USD could eventually drop 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 Euro.

    USD   -0.09% -0.02% 0.00% -0.02% 0.07% 0.25% 0.00%
    EUR 0.09%   0.07% 0.08% 0.05% 0.16% 0.32% 0.09%
    GBP 0.02% -0.06%   0.02% -0.01% 0.08% 0.28% 0.03%
    CAD 0.00% -0.09% -0.02%   -0.05% 0.07% 0.26% 0.00%
    AUD 0.04% -0.03% 0.03% 0.04%   0.10% 0.29% 0.04%
    JPY -0.07% -0.15% -0.08% -0.08% -0.10%   0.19% -0.07%
    NZD -0.27% -0.36% -0.27% -0.28% -0.31% -0.19%   -0.27%
    CHF 0.00% -0.06% -0.02% 0.00% -0.07% 0.09% 0.23%  

    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

    Why do people invest in Gold?

    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.

    Who buys the most Gold?

    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.

    How is Gold correlated with other assets?

    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.

    What does the price of Gold depend on?

    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.
    Gold price advances back closer to weekly top, upside potential seems limitedGold price (XAU/USD) edges higher during the Asian session on Thursday, albeit remains below the 50-day Simple Moving Average (SMA) pivotal resistance, around the $2,032 area, or over a one-week high touched the previous day.
    Source  Fxstreet
    Gold price (XAU/USD) edges higher during the Asian session on Thursday, albeit remains below the 50-day Simple Moving Average (SMA) pivotal resistance, around the $2,032 area, or over a one-week high touched the previous day.
    Silver Price Forecast: XAG/USD holds onto gains above $23 ahead of FOMC minutesSilver price (XAU/USD) turns sideways around $23.15 after a strong recovery in the European session on Wednesday.
    Source  Fxstreet
    Silver price (XAU/USD) turns sideways around $23.15 after a strong recovery in the European session on Wednesday.
    Gold price bulls remain on the sidelines amid modest US Dollar uptickGold price (XAU/USD) struggles to build on the previous day's positive move and oscillates in a narrow range above the $2,000 psychological mark during the Asian session on Friday.
    Source  Fxstreet
    Gold price (XAU/USD) struggles to build on the previous day's positive move and oscillates in a narrow range above the $2,000 psychological mark during the Asian session on Friday.