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    Gold price remains below a key hurdle as traders keenly await the US PCE Price Index

    Source Fxstreet
    Feb 29, 2024 03:55
    • Gold price draws support from a softer risk tone and a modest US Dollar downtick.
    • The upside remains capped amid the Fed’s higher-for-longer interest rates narrative.
    • Bulls also seem reluctant to place aggressive bets ahead of the US PCE Price Index release.

    Gold price (XAU/USD) ticks higher during the Asian session on Thursday and looks to build on the overnight modest bounce from the $2,025-2,024 area, or the weekly low. The precious metal, however, remains below the $2,040-2,042 strong horizontal barrier as traders keenly await the release of the US Personal Consumption Expenditures (PCE) Price Index. The crucial inflation data should provide fresh cues about the Federal Reserve's (Fed) rate-cut path, which, in turn, will play a key role in determining the next leg of a directional move for the non-yielding yellow metal.

    Heading into the key data risks, the US Dollar (USD) bulls opt to wait on the sidelines, which, in turn, lends some support to the Gold price. Apart from this, a slight deterioration in the global risk sentiment further benefits the safe-haven precious metal, though expectations the Fed will keep rates higher for longer might keep a lid on any further gains. Hence, it will be prudent to wait for strong follow-through buying before traders start positioning for the resumption of the recent recovery move from the $1,984 region, or the YTD low touched earlier this February.

    Daily digest market movers: Gold price struggles to attract any meaningful buying amid hawkish Fed expectations

    • The nervousness ahead of the crucial US inflation data tempers investors' appetite for riskier assets and lends support to the safe-haven Gold price amid a modest US Dollar downtick.
    • Several Federal Reserve officials reiterated on Wednesday that more work was needed to bring down inflation, which should allow the central bank to keep interest rates higher for longer.
    • New York Fed President John Williams said that the US central bank will begin cutting interest rates in 2024, albeit in the latter half of the year as the path to the 2% inflation target is uneven.
    • Atlanta Fed President Raphael Bostic said that he is comfortable advising patience when it comes to loosening policy and that the central bank has not declared victory over inflation yet.
    • Separately, Boston Fed Bank President Susan Collins said that the central bank will likely cut rates this year, though should be taking time to assess data before making any change to the policy.
    • The second estimate of the US GDP growth released on Wednesday showed that the US economy expanded by a 3.2% annualized pace in Q4, slightly less than the 3.3% rise reported originally.
    • The data, meanwhile, reinforced the view that the US economy remains in good shape and hawkish Fed expectations, though does little to provide any meaningful impetus to the US Dollar.
    • Nevertheless, the Fed's hawkish outlook on interest rates might cap any further appreciating move for the non-yielding metal ahead of the US Personal Consumption Expenditures (PCE) Price Index.
    • Thursday's US economic docket also features the release of Weekly Initial Jobless Claims, the Chicago PMI and Pending Home Sales, which, along with Fed speak, could provide some impetus.

    Technical analysis: Gold price could accelerate the positive move once the $2.041-2,042 barrier is cleared decisively

    From a technical perspective, sustained strength beyond the $2,041-2,042 hurdle will be seen as a fresh trigger for bulls and lift the Gold price further towards the next relevant hurdle near the $2,065 region. Given that oscillators on the daily chart have just started gaining positive traction, the momentum could extend further and allow the XAU/USD to aim back to reclaim the $2,100 round-figure mark.

    On the flip side, the weekly low. around the $2,025-2,024 area, touched the previous day, might continue to lend some support ahead of the 100-day SMA, currently near the $2,013-2,012 region. This is followed by the $2,000 psychological mark, which if broken might shift the near-term bias in favour of bearish traders and drag the Gold price to the $1,984 support en route to the very important 200-day SMA, near the $1,968 zone.

    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 Euro.

    USD   0.03% -0.06% -0.04% -0.36% -0.54% -0.17% -0.05%
    EUR -0.04%   -0.09% -0.07% -0.38% -0.57% -0.20% -0.08%
    GBP 0.06% 0.09%   0.01% -0.29% -0.48% -0.11% 0.01%
    CAD 0.04% 0.09% -0.02%   -0.31% -0.51% -0.12% 0.00%
    AUD 0.34% 0.36% 0.28% 0.31%   -0.19% 0.19% 0.30%
    JPY 0.54% 0.56% 0.47% 0.48% 0.19%   0.39% 0.50%
    NZD 0.16% 0.20% 0.11% 0.13% -0.20% -0.38%   0.14%
    CHF 0.05% 0.08% -0.01% 0.00% -0.31% -0.50% -0.11%  

    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.
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