In easy terms, the price of gold stayed steady in Asian trading on Thursday after bouncing back a bit on Wednesday. People who want to buy gold are waiting for more information about employment and how wages are changing in the United States. They’re also thinking about what the US Federal Reserve decided about interest rates and what Jerome Powell, the head of the Federal Reserve, said on Wednesday.
Gold Price Surges as Fed Maintains Expectations for Rate Cuts
In simple terms, the price of gold made a strong comeback on Wednesday after hitting its lowest point in four weeks at $2,282. This happened because both the US Dollar and US Treasury bond yields went down following signals from Federal Reserve Chair Powell that suggested the Fed might lower interest rates in the future. Also, US stocks went up, reducing the demand for the US Dollar as a safe investment, since Powell said there wouldn’t likely be any interest rate increases and hinted at possible rate cuts later this year.
In everyday language, the Federal Reserve kept the Fed Funds Rate unchanged between 5.25% and 5.5% at its May meeting, just like everyone anticipated. However, Powell mentioned that the Fed wants to be more sure that inflation is dropping towards the desired 2% level before making any changes. He said it might take more time than they thought to be confident about this. Powell also stated that they’re ready to keep the current interest rate for as long as necessary.
In simpler terms, the chances of the Federal Reserve cutting interest rates for the first time, likely in September, increased to 53% from about 47% before the Fed made any announcements. When interest rates are low, the price of gold usually goes up.
At the same time, the US Dollar was also affected by what seems to be another attempt by Japanese authorities to control its value. This caused the USD/JPY currency pair to drop by almost 450 pips in just 45 minutes. As a result, the price of gold held onto its recent gains. However, if the US Dollar starts to recover and the USD/JPY pair bounces back from around the 153.00 level, the upward movement of gold may be limited.
Later today, the weekly US Jobless Claims and the initial Unit Labor Cost data for the first quarter will be important to watch before Friday’s release of the Nonfarm Payrolls report.
Gold Price Technical Analysis: Daily Chart Overview
On the daily chart, we see that gold prices bounced back from around $2,280 and went back above $2,300. The 14-day Relative Strength Index (RSI), which shows if a stock is overbought or oversold, turned positive, indicating that buyers are stepping in. However, there’s a strong barrier at the 21-day Simple Moving Average (SMA) around $2,340. If gold breaks above this level and stays there, it could attract more buyers, pushing the price up to around $2,370. The next target after that is the high from April 22, which is around $2,392.
On the other hand, if gold falls below $2,300, it might face support there, but if it drops below that, it could fall to the lowest point in several months, which is around $2,282. If it goes even lower, the next support level is around the 50-day SMA, which is at $2,229.
