On Wednesday, the price of gold stayed around the same levels in North America. This happened as the US Treasury yields went up and the US dollar got stronger. There wasn’t much happening on the economic front in the US. Traders were waiting for the unemployment claims report on Thursday and the University of Michigan Consumer Sentiment survey on Friday.
The XAU/USD, which shows the price of gold in US dollars, was trading at $2,312. It went down just a little by 0.02% and basically stayed the same. Throughout the week, people in the market were really focused on what officials from the Federal Reserve were saying. There’s been a lot of talk about whether the Fed will lower interest rates or not. When interest rates go down, it usually helps gold prices. Right now, gold is still above the $2,300 mark.
Susan Collins, who’s the President of the Boston Federal Reserve, said she thinks demand will slow down to keep inflation at 2%. She also mentioned that there’s a risk of lowering interest rates “too soon.” She thinks the current policies are in a good position and are “moderately restrictive.”
The most recent employment report in the US came in weaker than anticipated, sparking concerns once again that the economy might slow down, possibly leading to rate cuts happening sooner than expected. This came after the Federal Reserve’s decision last Wednesday to keep rates steady, where they recognized that the risks related to their dual mandate had become more balanced.
At the same time, there’s ongoing physical demand for gold, with news circulating that China’s central bank has been consistently adding to its gold reserves, increasing them by 1.9 metric tonnes for the 18th consecutive month.
Market Digest: Gold Price Slides Below $2,320 Amid Rising US Yields
- Gold prices declined due to lower US Treasury yields and a strengthening US Dollar. The yield on the US 10-year Treasury note rose by seven basis points to 4.49% from its opening level. The US Dollar Index (DXY), which monitors the Greenback’s performance against six other currencies, increased by 0.16% to 105.55.
- Last Friday, April’s US Non-Farm Payroll (NFP) data missed estimates and fell below March’s figures. The Institute for Supply Management (ISM) Purchasing Managers’ Index (PMI) for the manufacturing and services sectors entering contractionary territory might weaken the US Dollar, providing support for gold.
- However, recent hawkish remarks by Minneapolis Federal Reserve President Neel Kashkari, suggesting that the Fed may keep interest rates unchanged and even consider raising the fed funds rate if inflation doesn’t continue to decline, strengthened the US Dollar.
- Gold has surged more than 12% in 2024, fueled by expectations that major central banks will start lowering interest rates. Concerns about the potential resumption of the Middle East conflict between Israel and Hamas could also boost XAU/USD prices.
- According to Reuters, the People’s Bank of China (PBoC) continued to add to its gold reserves for the 18th consecutive month, purchasing 60,000 troy ounces amid higher prices.
- Following the release of the US NFP data, the CME FedWatch Tool indicates that the likelihood of a quarter-percentage-point rate cut in September increased from 55% before the report to 85%.
- After the data release, the probability of Fed rate cuts increased, with traders anticipating a total of 36 basis points in rate cuts by the end of the year.
Technical Analysis: Gold Price Remains Bullish Despite Falling Below $2,320
Gold maintains an upward bias despite experiencing slight declines. Momentum continues to favor buyers, with the Relative Strength Index (RSI) remaining in bullish territory. This presents an opportunity for Gold buyers to take advantage of any downward movements by “buying the dip.”
For XAU/USD buyers to sustain optimism and potentially challenge all-time highs, they would need to surpass the April 26 high, which stands at $2,352. If this level is breached, it could pave the way for further gains towards the $2,400 mark, followed by the April 19 high at $2,417, and ultimately the all-time high of $2,431.
On the flip side, if Gold falls below the $2,300 threshold, it could signal further losses. In such a scenario, the next support level to watch would be the 50-day Simple Moving Average (SMA) at $2,249.
