Gold price sticks to modest gains, remains below multi-month top ahead of Fed’s Powell
- Gold price regains positive traction on Friday and is underpinned by rising Fed rate cut bets.
- Growing concerns about a global economic downturn lend additional support to the metal.
- The risk-on mood might cap gains ahead of the US ISM PMI and Fed Chair Powell’s speech.
Gold price (XAU/USD) attracts some dip-buying during the Asian session on Friday and reverses a major part of the previous day's losses. The precious metal currently trades around the $2,040 region, up over 0.15% for the day and well within the striking distance of its highest level since May 5 touched on Wednesday. Data released from the United States (US) on Thursday showed that inflation continued to moderate in October and a slowing labour market, validating the view that the Federal Reserve (Fed) is done raising interest rates. The dovish outlook turns out to be a key factor benefitting the non-yielding yellow metal.
Meanwhile, a duo of Fed officials pushed back against expectations for a quick pivot to rate cuts and left the door open to further policy tightening should the progress on inflation stall. This, however, does little to dim the prospects for an imminent shift in the Fed's policy stance and keeps a lid on the recent US Dollar (USD) recovery from its lowest level since August 11. Apart from this, mixed signs on the strength of China's economy and darkening global outlook lend support to the safe-haven Gold price. That said, the recent risk-on rally in the US equity markets might cap the XAU/USD ahead of Fed Chair Jerome Powell's speech.
Daily Digest Market Movers: Gold price continues to draw support from dovish Federal Reserve expectations
- Bets that the Federal Reserve will not hike rates again and may start easing its monetary policy by the first half of 2024 continue to lend some support to the non-yielding Gold price.
- The CME group's FedWatch Tool indicates an even possibility that the Fed will cut policy rates as early as March 2024 and a near 80% chance of such a move at the May FOMC meeting.
- The bets were reaffirmed by the key inflation data on Thursday, which showed that the Personal Consumption Expenditures (PCE) Price Index remained unchanged in October.
- Over the 12 months, the PCE Price Index registered the smallest year-on-year increase since March 2021 and decelerated from 3.4% to 3.0% during the reported month.
- Moreover, the gauge that strips out volatile food and energy prices rose by a modest 0.2% in October and saw an annual rise of 3.5%, further pointing to signs of easing inflation.
- Another report showed that Jobless Claims rose to 218K last week and 1.93 million people were collecting unemployment benefits the week that ended November 18 – the most in two years.
- New York Fed President John Williams said on Thursday that it will be appropriate to maintain a restrictive stance for quite some time to bring inflation back to the 2% target.
- San Francisco Fed President Mary Daly noted that interest rates are in a very good place to control inflation, though she is not thinking about cuts and that it was too soon to say if hikes are finished.
- Given the recent mixed signals, the market attention will remain glued to Fed Chair Jerome Powell's speech, which could infuse some volatility and provide a fresh impetus to the XAU/USD.
- Traders will also confront the release of the US ISM Manufacturing PMI, which is expected to improve to 47.6 in November, though remains in contraction territory for the 12th straight month.
Technical Analysis: Gold price seems poised to appreciate further, bulls await a move beyond the multi-month peak
From a technical perspective, any subsequent move-up is likely to face some resistance near the $2,052 area, or a multi-month peak. With oscillators on the daily chart holding comfortably in the positive territory, some follow-through buying will be seen as a fresh trigger for bullish traders and allow the Gold price to accelerate the momentum further towards challenging the all-time high, around the $2,079-2,080 zone touched in May.
On the flip side, the overnight swing low, around the $2,030 area, could act as immediate support ahead of the $2,020 zone and the $2,010-$2,008 strong horizontal resistance breakpoint. The latter should act as a key pivotal point, which if broken might prompt some technical selling and drag the Gold price further below the $2,000 psychological mark, towards testing the next relevant support near the $1,990 region.
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 Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF |
| USD | -0.07% | -0.04% | -0.10% | 0.04% | 0.06% | -0.07% | 0.02% |
| EUR | 0.07% | 0.02% | -0.04% | 0.10% | 0.13% | 0.00% | 0.09% |
| GBP | 0.03% | -0.03% | -0.07% | 0.07% | 0.11% | -0.03% | 0.06% |
| CAD | 0.10% | 0.04% | 0.07% | 0.14% | 0.17% | 0.04% | 0.14% |
| AUD | -0.04% | -0.10% | -0.07% | -0.13% | 0.03% | -0.10% | -0.01% |
| JPY | -0.06% | -0.10% | -0.11% | -0.19% | 0.01% | -0.12% | -0.04% |
| NZD | 0.06% | -0.01% | 0.02% | -0.04% | 0.09% | 0.13% | 0.09% |
| CHF | -0.03% | -0.10% | -0.06% | -0.13% | 0.01% | 0.05% | -0.09% |
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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