Gold price (XAU/USD) regains some positive traction following the previous day's modest pullback and holds steady above the $2,030 level during the Asian session on Tuesday. A fresh leg down in the US Treasury bond yields keeps the US Dollar (USD) bulls on the defensive, which, in turn, is seen acting as a tailwind for the commodity. Apart from this, a generally softer tone around the equity markets further benefits the precious metal's relative safe-haven status and remains supportive of the uptick.
That said, the Federal Reserve's (Fed) hawkish outlook for higher-for-longer interest rates might keep a lid on any meaningful appreciating move for the non-yielding Gold price. Traders might also refrain from placing aggressive directional bets and prefer to wait for the release of the US Personal Consumption Expenditures (PCE) Price Index on Thursday for cues about the likely timing of when the Fed will start cutting rates. This might further contribute to capping the upside for the precious metal.
From a technical perspective, any subsequent move up is likely to confront some resistance near the $2,041-2,042 area, or over a two-week high touched last Thursday. Some follow-through buying will confirm a break through the 50-day Simple Moving Average (SMA) barrier and pave the way for additional gains. Given that oscillators on the daily chart have just started gaining positive traction, the Gold price might then challenge the next relevant hurdle near the $2,065 supply zone. The momentum could extend further towards reclaiming the $2,100 round figure mark for the first time since early December 2023.
On the flip side, the overnight swing low, around the $2,025 region, might continue to protect the immediate downside ahead of the 100-day SMA, currently near the $2,009 area, and the $2,000 psychological mark. A convincing break below the latter will shift the near-term bias in favour of bearish traders and drag the Gold price to the $1,984 region en route to the very important 200-day SMA support near the $1,967-1,966 zone.
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Japanese Yen.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | 0.00% | 0.07% | 0.05% | 0.14% | -0.05% | 0.17% | 0.00% | |
EUR | 0.00% | 0.07% | 0.04% | 0.14% | -0.04% | 0.15% | -0.01% | |
GBP | -0.06% | -0.07% | -0.02% | 0.08% | -0.11% | 0.09% | -0.07% | |
CAD | -0.04% | -0.05% | 0.00% | 0.09% | -0.10% | 0.13% | -0.05% | |
AUD | -0.13% | -0.14% | -0.08% | -0.11% | -0.19% | 0.01% | -0.15% | |
JPY | 0.05% | 0.05% | 0.11% | 0.09% | 0.24% | 0.20% | 0.05% | |
NZD | -0.17% | -0.15% | -0.11% | -0.13% | -0.02% | -0.22% | -0.14% | |
CHF | 0.00% | 0.00% | 0.07% | 0.04% | 0.14% | -0.04% | 0.15% |
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 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.