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Gold price drifts lower for the third successive day and refreshes weekly low on Wednesday.
Receding safe-haven demand and hawkish Fed expectations weigh on the XAU/USD.
China’s economic woes could lend support to the safe-haven metal ahead of the Fed decision.
Gold price (XAU/USD) extends the previous day’s retracement slide from the vicinity of a five-and-half-month top touched last week and continues drifting lower during the Asian session on Wednesday. This marks the third successive day of a negative move and drags the commodity to a fresh weekly low, around the $1,978 region in the last hour. Easing concerns over the Israel-Hamas war, along with anticipation of a hawkish Federal Reserve (Fed), turn out to be key factors weighing on the non-yielding yellow metal.
The downside for the Gold price, however, is likely to remain limited as the market focus remains glued to the outcome of the highly-anticipated two-day FOMC monetary policy meeting, scheduled to be announced later during the US session. Apart from this, concerns about China’s fragile economic recovery at the start of the fourth quarter could lend support to the safe-haven metal and help limit deeper losses. This, in turn, warrants some caution before confirming that the XAU/USD has topped out in the near term.
Daily Digest Market Movers: Gold price retreats further from multi-month peak
Gold price registered its biggest monthly rise since November 2022, albeit kicks off the new month on a weaker note in the wake of receding safe-haven demand.
Traders are pricing in a lower risk premium from the Israel-Hamas war as no other Arab powers have joined in so far; Hamas said it will free foreign hostages in the next few days.
The US Dollar sticks to a positive bias on the back of expectation for any hawkish surprises from the highly-anticipated FOMC monetary policy meeting.
The Federal Reserve will announce its decision later during the US session and is expected to hold rates steady at a 22-year high for the second straight time.
The US economic resilience and still sticky inflation should allow the central bank to maintain its hawkish stance and leave the door open for more rate hikes.
The yield on the benchmark 10-year US government bond remains close to the 5% mark, or a 16-year top touched in October and underpins the US Dollar.
A Caixin-sponsored survey showed that business activity in China’s manufacturing sector contracted in October for the first time in three months.
This suggests that stimulus efforts from China only provided limited support to the fragile economic recovery and could lend support to the XAU/USD.
Technical Analysis: Gold price could attract some dip-buying at lower levels
From a technical perspective, the ongoing decline might still be categorized as a corrective pullback, especially after a steep rise of over 10% from the October swing low. Moreover, the Relative Strength Index (RSI) on the daily chart has eased from the overbought territory. Hence, any subsequent fall might still be seen as a buying opportunity and remain limited. The $1,970 area is likely to protect the immediate downside, below which the Gold price could drop to last week’s swing low, around the $1,954-$1,953 region.
On the flip side, the Asian session peak, around the $1,986 area, now seems to act as an immediate hurdle ahead of the $2,000 psychological mark and the $2,007-2,009 region, or the multi-month top. A sustained strength beyond the latter should pave the way for an extension of over a three-week-old strong bullish trend and lift the Gold price to the next relevant barrier near the $2,022 zone.
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 Japanese Yen.
USD
EUR
GBP
CAD
AUD
JPY
NZD
CHF
USD
0.06%
0.02%
0.00%
-0.03%
-0.09%
-0.01%
-0.05%
EUR
-0.07%
-0.04%
-0.04%
-0.10%
-0.15%
-0.08%
-0.10%
GBP
-0.01%
0.05%
0.00%
-0.06%
-0.11%
-0.05%
-0.06%
CAD
0.00%
0.06%
0.03%
-0.04%
-0.08%
-0.02%
-0.04%
AUD
0.04%
0.09%
0.06%
0.02%
-0.06%
0.02%
0.00%
JPY
0.09%
0.15%
0.13%
0.09%
0.07%
0.08%
0.09%
NZD
0.01%
0.08%
0.05%
0.04%
-0.01%
-0.06%
-0.02%
CHF
0.04%
0.09%
0.06%
0.03%
0.00%
-0.07%
0.02%
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.
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