Gold price remains on the defensive on hawkish Fed

Fonte Fxstreet
24/05/2024 01:02
  • Gold price trades on a negative note on the stronger USD on Friday. 
  • The higher-for-longer US rate narrative weighs on the yellow metal. 
  • Investors will monitor the Fed’s Waller speech, US Durable Goods Order, and Michigan Consumer Sentiment Index report on Friday.

Gold price (XAU/USD) edges lower to a two-week low on Friday amid renewed US Dollar (USD) demand. The diminishing bets of a rate cut in September from the US Federal Reserve (Fed) exert some selling pressure on the precious metal. Nonetheless, the safe-haven flows amid the rising geopolitical tensions in the Middle East might lift the gold price. 

Gold investors will take more cues from the Fedspeak. The Fed’s Waller is set to speak on Friday. The hawkish remarks from the Fed policymakers might further weigh on yellow metal. It’s worth noting that a higher rate generally hurts gold price as it increases the opportunity cost of investing in the yellow metal. Apart from this, the US Durable Goods Order and Michigan Consumer Sentiment Index will be released. 

Daily Digest Market Movers: Gold price retreats from record highs amid the Fed’s hawkish stance

  • The US Initial Jobless Claims fell by 8K to 215K for the week ending May 18. This figure came in lower than the expectation of 220K and the previous week's reading of 223K.
  • The flash US S&P Global Manufacturing PMI rose to 50.9 in May from 50.0 in April. The Services PMI climbed to 54.8 in May from the previous reading of 51.3. Both figures came in better than the estimation. 
  • The US S&P Global Composite PMI jumped to 54.4 in May from 51.3 in April, beating the market expectation of 51.1, the highest level since April 2022.
  • Atlanta Fed President Raphael Bostic said that he still sees upward inflation pressure, adding the Fed may need to be more patient to avoid heating the economy.
  • China’s private sector imported 543 tonnes of gold in Q1 2024, and the People’s Bank of China (PBoC) added another 189 tonnes to its reserves during the same period, according to the latest analysis by Gainesville Coins’ Jan Nieuwenhuijs.
  • Gold imports to India, the world's second-largest gold consumer, might decline by about a fifth in 2024 as high prices encourage retail customers to exchange old jewelry for new products, per Reuters. 

Technical Analysis: Gold price’s bullish outlook remains intact, with a Bearish Divergence in focus 

Gold price trades on a weaker note on the day. The precious metal keeps the bullish vibe unchanged on the daily chart as it holds above the key 100-period Exponential Moving Average (EMA). However, the yellow metal has formed a bearish divergence as the price made higher highs on May 20, but the RSI indicator has formed lower highs, suggesting the momentum is slowing and a correction or consolidation in price cannot be ruled out. 

The upper boundary of Bollinger Band at $2,428 acts as an immediate resistance level for XAU/USD. A decisive break above this level could resume its climb to an all-time high of $2,450, en route to the $2,500 psychological barrier. 

On the flip side, the first downside target will emerge at a low of May 13 at $2,285. Extended losses could take gold lower to the lower limit of the Bollinger Band at $2,267. Further south, the next contention level is seen at the 100-period EMA of $2,217. 

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 New Zealand Dollar.

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

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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