Gold price extends its upside as investors bet on rate cuts

Fonte Fxstreet
21/05/2024 01:25
  • Gold price trades on a stronger note on Tuesday amid the softer USD. 
  • The hope for Fed rate cuts, rising geopolitical risks, and strong gold demand support the yellow metal. 
  • Investors await the Fed’s Waller, Williams, Barr, Bostic, Collins, and Mester later on Tuesday. 

Gold price (XAU/USD) extends the rally on Tuesday after retracing from a record high earlier. The renewed gold demand is bolstered by higher bets on interest rate cuts from the US Federal Reserve (Fed), ongoing geopolitical tensions, along with the strong demand stemming from central banks and Asian buyers. 

Nonetheless, the lack of fresh catalysts in a quiet session in terms of top-tier economic data might limit the precious metal’s upside. Gold traders will take more cues from the Fedspeak, with the Fed’s Waller, Williams, Barr, Bostic, Collins, and Mester scheduled to speak later on Tuesday. The FOMC Minutes will be the highlight on Wednesday. Furthermore, the hawkish stance from Fed officials is likely to lift the Greenback and drag the USD-denominated Gold lower. 

Daily Digest Market Movers: Gold price holds gains amid the rate cut expectation

  • Gold reached a record high on Monday at $2,450, and silver prices moved toward 12-year highs. Gold has risen 18% this year, while silver has gained 35%. 
  • Fed Vice Chair Michael Barr said that the central bank “will need to allow our restrictive policy some further time to continue to do its work.” 
  • Fed policymaker Philip Jefferson, another permanent voting member of the Fed's rate-setting committee, said inflation was still easing, although nowhere near as quickly as he expected. 
  • Atlanta Fed President Raphael Bostic said that policy is restrictive and that it would take a while before the central bank gains confidence that inflation is headed to 2%.  
  • Investors see a 76% odd of rate cut from the Fed by 25 basis points (bps) in September and two cuts by the end of the year, according to the CME FedWatch Tool.   

Technical Analysis: Gold price’s constructive stance remains intact

Gold price posts modest gains on the day. According to the four-hour timeframe, the yellow metal keeps the positive stance unchanged as it holds above the key 100-period Exponential Moving Average (EMA) with an upward slope. The Relative Strength Index (RSI) stands in the bullish zone around 69.00, suggesting the support level to likely to hold rather than break. 

Any follow-through buying could make another attempt at breaking above an all-time high of $2,450. Further north, the next hurdle is seen at the $2,500 psychological mark. 

On the other hand, the resistance-turned support level of $2,420 acts as an initial support level for XAU/USD. The additional downside filter to watch is the $2,400 round number. The key contention level will emerge at the 100-period EMA at $2,355.  

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 Australian Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.01% 0.01% 0.04% 0.01% 0.05% 0.03% 0.08%
EUR -0.01%   0.00% 0.02% -0.01% 0.03% 0.02% 0.07%
GBP -0.01% 0.00%   0.04% -0.01% 0.03% 0.02% 0.07%
CAD -0.04% -0.03% -0.03%   -0.03% 0.00% -0.01% 0.05%
AUD -0.01% 0.00% 0.00% 0.02%   0.04% 0.01% 0.07%
JPY -0.05% -0.01% -0.03% 0.00% -0.04%   -0.02% 0.05%
NZD -0.03% -0.01% -0.02% 0.01% -0.02% 0.02%   0.07%
CHF -0.08% -0.07% -0.07% -0.05% -0.08% -0.04% -0.06%  

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

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.

 

Isenção de responsabilidade: Apenas para fins informativos. O desempenho passado não é indicativo de resultados futuros.
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