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Gold price loses ground in Monday’s Asian session.
The lower bets on the Fed rate cuts weigh on the precious metal.
Fed’s Jefferson and Mester are set to speak later on Monday.
Gold price (XAU/USD) trades on a negative note on Monday during the Asian session. The hawkish remarks from the Federal Reserve (Fed) and growing speculation that the Fed might delay its easing plans have boosted the Greenback and dragged the USD-denominated gold lower. However, signs of economic weakness and ongoing geopolitical tensions in the Middle East are likely to support precious metals in the near term.
Gold traders will keep an eye on the Fed’s Jefferson and Mester speeches on Monday. Later this week, the US Consumer Price Index (CPI), Producer Price Index (PPI), and Retail Sales will be in the spotlight. In case of stronger-than-expected economic data, this might dampen the hope for a Fed rate cut and exert some selling pressure on the XAU/USD
Daily Digest Market Movers: Gold price attracts some sellers amid the Fed’s hawkish remarks
San Francisco Fed President Mary Daly highlighted the need for prolonged restrictive policy to achieve the Fed’s inflation targets.
Atlanta Fed President Raphael Bostic said that the central bank is probably still planning to cut its interest rates this year, despite the uncertain outlook.
Dallas Fed President Lorie Logan said that there are upside risks to inflation, adding that it is too soon to cut interest rates.
Minneapolis Fed President Neel Kashkari stated that he’s in a “wait-and-see mode,” and there is a “high” bar to concluding that higher rates are needed to cool inflation.
The Israeli military said that it launched operations in northern Gaza overnight and that “precise operations” are ongoing in eastern Rafah and near the Rafah border, as well as in the Zeitoun neighborhood in central Gaza. The military engagement in Rafah occurs before a full-scale invasion, per CNN.
The initial reading of the Michigan Consumer Sentiment Index dropped to 67.4 in May from 77.2 in April, weaker than the expectation of 76.0.
The University of Michigan’s (UoM) one-year inflation outlook jumped to 3.5%, while the five-year outlook rose to 3.1%. Both figures registered the highest level since November 2023.
Technical Analysis: Gold price keeps the constructive picture unchanged
The gold price edges lower on the day. Nonetheless, the bullish stance of the yellow metal remains intact as it holds above the key 100-day Exponential Moving Average (EMA) on the four-hour chart. The upward momentum is supported by the 14-day Relative Strength Index (RSI) which stands in bullish territory around 63.50, suggesting the further upside looks favorable.
The first upside barrier for XAU/USD will emerge near a high of May 10, $2,378, en route to the $2,400 psychological level. A decisive break above this level could clear the path for a rally to the next major resistance near an all-time high near $2,432, and then the $2,500 figure.
On the downside, the key support level is seen near the confluence of the resistance-turned-support level and the 100-period EMA at $2,325. Further south, the next contention level is located near a low of May 2 at $2,281.
US Dollar price in the last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the weakest against the Euro.
USD
EUR
GBP
CAD
AUD
JPY
NZD
CHF
USD
-0.13%
0.12%
-0.08%
0.19%
1.48%
-0.02%
0.07%
EUR
0.11%
0.24%
0.04%
0.31%
1.58%
0.09%
0.19%
GBP
-0.14%
-0.24%
-0.20%
0.06%
1.34%
-0.15%
-0.05%
CAD
0.08%
-0.05%
0.21%
0.30%
1.56%
0.05%
0.16%
AUD
-0.20%
-0.33%
-0.09%
-0.26%
1.29%
-0.21%
-0.11%
JPY
-1.51%
-1.62%
-1.35%
-1.58%
-1.28%
-1.48%
-1.44%
NZD
0.03%
-0.08%
0.15%
-0.04%
0.22%
1.51%
0.10%
CHF
-0.08%
-0.21%
0.03%
-0.16%
0.10%
1.40%
-0.12%
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).
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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