Gold prices went down slightly on Tuesday in North America after hitting a high of $2,334. This rise was because of a report from S&P Global Purchasing Managers Index (PMI) showing weaker results than expected. However, despite the US dollar getting weaker and US Treasury yields dropping, buyers didn’t take full advantage of these situations.
Currently, the XAU/USD is trading at $2,323, down by 0.11%. The US 10-year Treasury yield remains steady at 4.402%, but the real yields, which usually move in the opposite direction of gold prices, decreased by 0.41% to 2.192%. This drop in real yields is good news for gold.
Even though there are geopolitical tensions, especially after Iran’s attack on Israel and the retaliation from Israel, these tensions seem to be easing. Additionally, data from S&P Global has made investors hopeful for a rate cut, especially after last week’s talk from Federal Reserve officials, including Chairman Jerome Powell, which hinted at a more hawkish stance. A member of the Federal Open Market Committee (FOMC), Chicago Fed’s Austan Goolsbee, who is known for his dovish views, also expressed concerns about inflation progress, suggesting that it has slowed down.
Market Recap: Gold Holds Steady, but Shows Downward Tilt After Monday’s Decline
S&P Global, a company that analyzes financial data, said that business activity in the manufacturing sector of the United States decreased. This month, the Manufacturing PMI dropped from 51.9 to 49.9. Meanwhile, the Services and Composite Index also slowed down from 51.7 and 52.1 to 50.9 in both measurements.
Other information showed that sales of new homes went up to the highest level in six months, according to the US Department of Commerce. However, the number of building permits, which is a sign of future construction, stayed in negative territory, even though it improved slightly from -4.3% to -3.7%.
The US Dollar Index (DXY), which compares the dollar to other currencies, fell by 0.44% to 105.68.
This week in the US, important economic reports are expected. One is the Gross Domestic Product (GDP) for the first three months of 2024. Analysts predict that the GDP grew by 2.5%, which is lower than the growth in the last quarter of 2023, which was 3.4%.
Another report to watch is the March Personal Consumption Expenditure (PCE) Price Index, which is a key measure of inflation for the Federal Reserve. If the PCE shows lower inflation than expected, gold traders might buy more gold, hoping to make profits. However, if prices go up, it could strengthen the US dollar and US Treasury yields, which might not be good for gold prices.
The PCE is expected to show a slight increase, while the Core PCE, which excludes volatile items like food and energy, is expected to drop from 2.8% to 2.6% compared to the same time last year.
Traders on the Chicago Board of Trade (CBOT) predict that the fed funds rate, which is the interest rate set by the Federal Reserve, will end 2024 at 4.955%, slightly lower than what was predicted on Monday, which was 4.99%.
Technical Analysis: Gold Price at Risk of Diving Beneath $2,300
After dropping sharply on Monday and forming a pattern on the chart that suggests more potential drops, the price of gold reached its lowest point in two weeks at $2,291. But buyers of gold managed to push the price back above the $2,300 mark. However, their job isn’t done yet. To keep control, they need to push the price of gold above the psychological level of $2,350. If they manage that, it could open the path for them to try to reach $2,400.
If they go beyond that level, the next targets would be the high point of last Friday, which was $2,417, and then the highest point ever reached, which was $2,431.
On the other hand, if sellers of gold manage to make the price close below the low point of $2,324 reached on April 15th, it could lead to a test of the $2,300 mark. If they break through that level, the next target would be the high point reached on March 21st, which was $2,222.
