On Friday, the gold price (XAU/USD) is exhibiting an upward trend. The recent positive movement in precious metals has been fueled by weaker-than-anticipated US inflation figures for April, leading to speculation about potential rate cuts by the US Federal Reserve (Fed). Nevertheless, the cautious stance taken by Fed officials on Thursday, indicating a preference to maintain higher borrowing costs for an extended period, implies that the central bank is not eager to lower interest rates in the current year. Consequently, this stance could strengthen the US Dollar (USD) overall and exert downward pressure on gold prices, as increased interest rates may diminish the appeal of non-yielding gold for investors.
With a lack of significant economic data releases scheduled in the US, investors will closely monitor remarks from Federal Reserve officials, known as Fedspeak, which could provide insights into the Fed’s future monetary policy direction. Federal Reserve representatives such as Kashkari, Waller, and Daly are scheduled to deliver speeches later in the day.
Daily Market Digest: Gold Price Gains Ground Despite Fed Officials Hinting at Prolonged Interest Rate Elevation
- The US weekly Initial Jobless Claims rose to 222K for the week ending May 11, exceeding the previous week’s 232K and the estimated 220K, as reported by the US Bureau of Labor Statistics (BLS).
- Housing Starts climbed by 5.7% month-over-month (MoM) to 1.36 million in April, while Building Permits fell by 3% MoM in April to 1.44 million.
- Atlanta Fed President Raphael Bostic commented on the recent Consumer Price Index (CPI) report, noting signs of subdued inflation, but he emphasized the importance of monitoring May and June data to confirm the trend.
- Cleveland Fed President Loretta Mester expressed confidence in current monetary policy positioning, stating it was premature to conclude that progress on inflation had halted.
- Richmond Fed President Tom Barkin emphasized the necessity of maintaining elevated borrowing costs to ensure inflation aligns with the central bank’s target, citing rising prices in the services sector.
- Financial markets are indicating a nearly 75% probability of a Fed rate cut in September, up from 65% earlier in the week. Additionally, markets anticipate full 25 basis point (bps) rate cuts by the end of the year, according to the CME FedWatch Tool.
Technical Analysis: Gold Price Sustains Upside Momentum
The gold price is currently trading positively, maintaining an upward trajectory. As indicated by the four-hour chart, the precious metal has been following an ascending trend channel since May 2. This constructive trend remains robust, supported by its position above the 100-period Exponential Moving Average (EMA). The prevailing market sentiment favors further upward movement, with the Relative Strength Index (RSI) hovering in the bullish territory around 72.00.
At present, the upper boundary of the ascending trend channel, coupled with the psychological barrier of $2,400, poses a significant resistance level for gold. However, a breakthrough above this level could prompt gold to challenge its previous all-time high of $2,432 before potentially reaching the $2,500 mark.
Conversely, in a bearish scenario, attention should be given to the lower limit of the ascending trend channel at $2,355, serving as the initial support level. Further downward movement may find additional support near the 100-period EMA around $2,340. If selling pressure persists beyond this point, gold could retreat towards the $2,300 mark.
Below is a table illustrating the percentage fluctuations of the US Dollar (USD) against various major currencies as of today. Notably, the US Dollar displayed its most significant weakness against the Canadian Dollar.
The heatmap depicts the percentage shifts among major currencies relative to each other. It utilizes a base currency selected from the left column and a quote currency chosen from the top row. For instance, if you select the Euro from the left column and track across the corresponding horizontal line to the Japanese Yen, the percentage alteration indicated within the box signifies the change in EUR/JPY pairing.
