Gold price attracts buyers on Wednesday and recovers further from the weekly low.
Softer US bond yields keep the USD bulls on the defensive and lend some support.
Recession fears and geopolitical risks further seem to benefit the safe-haven metal.
Gold price (XAU/USD) builds on the overnight bounce from the $1,954-1,953 region and gains some follow-through positive traction during the Asian session on Wednesday. The non-yielding yellow metal, for now, seems to have stalled its recent retracement slide from the vicinity of the $2,000 psychological mark, or a five-month top touched last Friday, and benefits from softer US Treasury bond yields.
Apart from this, looming recession risk, fueled by a flurry of weaker economic data from Europe on Tuesday, along with the Middle East conflict, turns out to be another factor driving haven flows towards the Gold price. The precious metal had rallied over 8% in the past two weeks on the back of concerns that the Israel-Hamas war could spill over to other Middle Eastern nations and impact the world economy.
That said, the prospects for further policy tightening by the Federal Reserve (Fed) hold back bulls from placing aggressive bets and cap the upside for the Gold price. Traders also seem reluctant and prefer to wait for Fed Chair Jerome Powell’s speech later during the US session. The focus, meanwhile, will remain on the release of the US Core PCE Price Index – the Fed’s preferred inflation gauge – due on Friday.
Daily Digest Market Movers: Gold price struggles to capitalize on its modest intraday gains
Gold price attracts some buyers in the wake of retreating US Treasury bond yields, which keeps the US Dollar (USD) bulls on the defensive, and geopolitical risks.
World leaders pushed for either a pause or ceasefire between Israel and Hamas so that humanitarian aid could be delivered to the besieged Gaza Strip.
The benchmark 10-year US Treasury yield moves further away from a 16-year peak after crossing the symbolic 5% threshold level for the first time since 2007.
Business activity in the Euro Zone took a surprise turn for the worse and revived recession fears, which further benefits the safe-haven XAU/USD.
The US manufacturing sector pulled out of a five-month contraction and services activity accelerated modestly, pointing to a still resilient economy.
The Fed is expected to maintain the status quo in November, though the markets are pricing in the possibility of one more 25 basis point lift-off by the year-end.
Investors now look to Fed Chair Jerome Powell’s speech for cues about the future rate-hike path, which, in turn, should provide a fresh impetus to the metal.
The focus will also be on the Advance US Q3 GDP report and the European Central Bank (ECB) rate decision on Thursday, followed by the US PCE price index on Friday.
Technical Analysis: Gold price might now confront resistance near the $1,982-1,983 area, or the weekly top
From a technical perspective, any subsequent move up is likely to confront some resistance near the weekly high, around the $1,982-1,983 region. Some follow-through buying should allow the Gold price to make a fresh attempt to conquer the $2,000 psychological mark. The subsequent move up has the potential to lift the XAU/USD further towards the next relevant hurdle near the $2,022 area.
On the flip side, the $1,964 level now seems to protect the immediate downside ahead of the weekly low, around the $1,953-1,952 zone touched on Tuesday. The latter represents a strong horizontal resistance breakpoint and should act as a pivotal point, below which the Gold price could slide back to the 200-day Simple Moving Average (SMA), currently pegged near the $1,932-1,931 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 strongest against the Canadian Dollar.
USD
EUR
GBP
CAD
AUD
JPY
NZD
CHF
USD
-0.09%
-0.09%
0.00%
-0.35%
-0.01%
-0.05%
-0.03%
EUR
0.08%
-0.01%
0.08%
-0.25%
0.07%
0.03%
0.06%
GBP
0.10%
0.00%
0.09%
-0.25%
0.08%
0.03%
0.07%
CAD
-0.01%
-0.10%
-0.10%
-0.34%
-0.02%
-0.07%
-0.04%
AUD
0.35%
0.25%
0.27%
0.36%
0.33%
0.29%
0.33%
JPY
0.01%
-0.07%
-0.09%
-0.01%
-0.33%
-0.04%
-0.01%
NZD
0.07%
-0.03%
-0.03%
0.06%
-0.28%
0.04%
0.03%
CHF
0.03%
-0.07%
-0.07%
0.03%
-0.33%
0.01%
-0.05%
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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