Gold price sits near six-month peak, bullish potential intact amid dovish Fed bets
- Gold price trades with a positive bias for the fourth straight day, near a multi-month peak.
- Bets that the Fed is done raising rates and start easing its policy in 2024 remain supportive.
- A positive risk tone caps the upside as traders await the US PCE Price Index on Thursday.
Gold price (XAU/USD) pushed through the $2,008-2,010 horizontal barrier and advanced to the $2,018 region on Monday, or its highest level since mid-May. The precious metal holds steady near the said area through the Asian session on Tuesday and seems poised to prolong a near three-week-old uptrend amid expectations for a pause in the Federal Reserve's monetary tightening cycle. Moreover, bets for a Fed rate cut in 2024 have been brought forward in the wake of signs of easing inflationary pressures, which continues to undermine the US Dollar (USD) and validates the positive outlook for the non-yielding yellow metal.
Apart from this, concerns about a global economic downturn turn out to be another factor lending support to the safe-haven Gold price. That said, a positive tone around the Asian equity markets acts as a headwind for the precious metal. Bullish traders also seem reluctant to place aggressive bets and prefer to wait for the release of the Personal Consumption Expenditure (PCE) Price Index from the United States (US) for some meaningful impetus. In the meantime, the release of the Conference Board's Consumer Confidence Index and speeches by influential FOMC members could produce short-term trading opportunities later this Tuesday.
Daily Digest Market Movers: Gold price remains supported by dovish Fed expectations
- Growing acceptance that the Federal Reserve is done raising rates assists the non-yielding Gold price to hold steady above the $2,000 psychological mark.
- Softer US consumer inflation figures released two weeks ago lifted bets that the Fed will hold rates at the current levels and begin easing policy in 2024.
- Data released on Monday showed that sales of new single-family homes in the US fell more than expected in October as higher mortgage rates reduced affordability.
- The benchmark 10-year US Treasury bond yield languishes near a two-month low and drags the US Dollar to a near three-month low, benefitting the XAU/USD.
- Looming recession risks lend additional support to the safe-haven precious metal, though a positive tone around the equity markets caps any further gains.
- Traders now look to the Conference Board's US Consumer Confidence Index and speeches by Fed officials for some impetus later during the North American session.
- The market focus, meanwhile, will remain glued to the release of the Fed's preferred inflation gauge – the core PCE Price Index – scheduled on Thursday.
Technical Analysis: Gold price seems poised to prolong a nearly three-week-old uptrend
From a technical perspective, the overnight breakout through the $2,008-2,010 horizontal barrier was seen as a fresh trigger for bullish traders. Moreover, oscillators on the daily chart are holding comfortably in the positive territory and are still far from being in the overbought zone. This, in turn, suggests that the path of least resistance for the Gold price is to the downside. Hence, a subsequent move up towards testing the next relevant resistance, around the $2,035 region, looks like a distinct possibility. The momentum could get extended further towards the $2,048 intermediate hurdle en route to the YTD peak, around the $2,078 region touched in May.
On the flip side, the $2,010-2,008 resistance breakpoint now seems to protect the immediate downside ahead of the $2,000 mark. Some follow-through selling, leading to a subsequent slide below the $1,988-1,987 region, could pave the way for deeper losses. The Gold price might then accelerate the fall towards the $1,978 zone en route to the $1,967-1,966 area and the $1,955 support zone. A convincing break below the latter will expose the 200-day Simple Moving Average (SMA), currently pegged near the $1,942 region and the $1,935-1,934 confluence – comprising the 100- and the 50-day SMAs.
US Dollar price this month
The table below shows the percentage change of US Dollar (USD) against listed major currencies this month. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF |
| USD | -3.58% | -3.98% | -2.00% | -4.42% | -2.07% | -5.05% | -3.37% |
| EUR | 3.43% | -0.41% | 1.52% | -0.84% | 1.43% | -1.45% | 0.18% |
| GBP | 3.83% | 0.39% | 1.92% | -0.44% | 1.85% | -1.05% | 0.59% |
| CAD | 1.96% | -1.56% | -1.94% | -2.39% | -0.07% | -3.00% | -1.35% |
| AUD | 4.24% | 0.81% | 0.43% | 2.32% | 2.27% | -0.58% | 1.01% |
| JPY | 2.02% | -1.48% | -1.89% | 0.08% | -2.32% | -2.97% | -1.25% |
| NZD | 4.82% | 1.43% | 1.04% | 2.93% | 0.61% | 2.87% | 1.63% |
| CHF | 3.25% | -0.22% | -0.60% | 1.32% | -1.04% | 1.22% | -1.65% |
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.
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