Gold price manages to hold its neck above a multi-week low touched on Monday.
Fed rate cut bets cap the attempted USD recovery and lend support to the metal.
Traders now look to the US ADP report and ISM Services PMI for a fresh impetus.
Gold price (XAU/USD) attracted some sellers on Tuesday and dropped to the $2,316-2,315 area, back closer to a multi-week low touched the previous day in the wake of a modest US Dollar (USD) strength. The attempted USD recovery from over a two-month low, however, lacked follow-through on the back of growing acceptance that the Federal Reserve (Fed) will start cutting interest rates later this year, bolstered by softer US macro data. The expectations keep the US Treasury bond yields depressed, which, in turn, is seen benefitting the non-yielding yellow metal during the Asian session on Wednesday.
Apart from this, geopolitical risks stemming from the ongoing conflicts in the Middle East lift the safe-haven Gold price back closer to the 50-day Simple Moving Average (SMA). Despite a combination of supporting factors, the XAU/USD remains confined in a one-week-old trading range as investors seem reluctant to place aggressive directional bets and prefer to wait for the release of the crucial US monthly employment details, or the Nonfarm Payrolls (NFP) report on Friday. In the meantime, the US ADP report on private-sector employment and the US ISM Services PMI should provide some impetus later today.
Daily Digest Market Movers: Gold price draws support from softere USD, Fed rate cut bets
The US Dollar staged a modest bounce from over a two-month low touched on Tuesday and exerted downward pressure on the Gold price, though dismal US macro data helped limit losses.
The Job Openings and Labor Turnover Survey, or JOLTS report, showed that job openings fell more than expected, by 296K to 8.059 million in April, or the lowest in more than three years.
This follows the disappointing release of the US ISM Manufacturing PMI on Monday, which showed a surprising weakness in business activity and pointed to signs of a cooling US economy.
Meanwhile, there is a risk that the US economy might be softening more than anticipated cemented bets for a September rate cut by the Federal Reserve, dragging the US Treasury bond yields lower.
The rate-sensitive two-year US government bond and the benchmark 10-year Treasury yield languish near a two-week low, capping the USD and lending support to the non-yielding yellow metal.
Traders now look forward to Wednesday’s US economic docket, featuring the release of the ADP report on private-sector employment and the ISM Services PMI to grab short-term opportunities.
The focus, however, remains glued to the official monthly employment data, popularly known as the Nonfarm Payrolls report, which will determine the next leg of a directional move for the XAU/USD.
Technical Analysis: Gold price needs to move above $2,350 hurdle for bulls to seize back control
From a technical perspective, the Gold price now seems to have found acceptance below the 50-day Simple Moving Average (SMA). Moreover, oscillators on the daily chart have just started gaining negative traction and support prospects for further losses. A subsequent slide below the multi-week low, around the $2,315-2,314 area touched on Tuesday, will reaffirm the bearish bias and drag the XAU/USD below the $2,300 mark, towards testing the $2,280 horizontal support. Some follow-through selling will be seen as a fresh trigger for bearish traders and pave the way for an extension of the recent corrective decline witnessed over the past two weeks or so.
On the flip side, any meaningful upside now seems to confront stiff resistance near the $2,349-2,350 supply zone. The next relevant hurdle is pegged near the $2,360-2,364 area, which, if cleared decisively, should allow the Gold price to climb further towards the $2,385 intermediate hurdle en route to the $2,400 mark. The momentum could extend towards the $2,425 zone and eventually lift the XAU/USD to the $2,450 region, or the all-time peak touched in May.
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 Japanese Yen.
USD
EUR
GBP
CAD
AUD
JPY
NZD
CHF
USD
0.03%
0.01%
-0.02%
-0.20%
0.22%
-0.19%
0.09%
EUR
-0.03%
-0.03%
-0.06%
-0.22%
0.21%
-0.21%
0.07%
GBP
0.00%
0.03%
-0.03%
-0.19%
0.24%
-0.19%
0.10%
CAD
0.02%
0.06%
0.03%
-0.17%
0.29%
-0.16%
0.15%
AUD
0.20%
0.22%
0.20%
0.18%
0.44%
0.01%
0.30%
JPY
-0.21%
-0.21%
-0.22%
-0.26%
-0.43%
-0.43%
-0.14%
NZD
0.19%
0.22%
0.20%
0.17%
-0.01%
0.41%
0.28%
CHF
-0.10%
-0.07%
-0.10%
-0.13%
-0.29%
0.14%
-0.28%
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).
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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