Gold prices, represented by XAU/USD, are struggling to reach new all-time highs around $2,430 during Friday’s early New York trading session. Despite this, the price of the precious metal is holding onto some gains for the day, supported by investors seeking safe-haven assets due to rising tensions in the Middle East.
On Friday, Israel retaliated against Iran by targeting areas near the city of Isfahan. However, Iran has played down the attack, stating that their air defense has destroyed three drones. This has somewhat eased concerns in the markets, leading to a slight decrease in gold prices.
Additionally, the expectation of higher interest rates from the Federal Reserve is putting pressure on gold’s upward movement. Fed policymakers believe that interest rates should stay higher for longer as progress in bringing inflation down to the 2% target has slowed. However, despite this hawkish stance from the Fed, US Treasury bond yields have fallen to 4.58% in Friday’s London session.
The US Dollar Index (DXY), which measures the value of the US dollar against other major currencies, has also decreased slightly to 106.10. This is because traders are reassessing expectations for rate cuts from other central banks, such as the Bank of England (BoE) and the Reserve Bank of New Zealand (RBNZ). Investors are now pricing in potential delays in rate cuts from these central banks amid concerns that inflationary pressures could rise again.
Daily Digest Market Movers: Gold Price Shows Strength as US Dollar and Yields Decline
Gold prices gave up most of the gains made during the day after the Israeli military responded to Iran’s attack, as reported by Reuters. The New York Times cited Iranian officials who claimed that the strike targeted a military air base near the city of Isfahan, although Israel has not confirmed the drone attack.
Investors seem to view the attack near an Iranian nuclear facility with skepticism, and Iran has stated that they do not plan to retaliate immediately.
Meanwhile, uncertainty about when the Federal Reserve (Fed) will start cutting interest rates continues to limit the upside in gold prices. Traders are eyeing the September meeting as a potential moment for the central bank to shift towards rate cuts, according to the CME FedWatch tool. However, Fed policymakers are hesitant to provide a specific timeline as inflation remains stubborn despite strong consumer spending and tight labor market conditions.
Atlanta Fed President Raphael Bostic suggested that progress in bringing inflation down to the 2% target will be slower than anticipated and conditions for rate cuts may not be favorable for the central bank by the end of the year. Bostic emphasized patience and expressed no rush for rate cuts due to robust labor demand and resilient wage growth.
Similarly, New York Fed President John Williams also adopted a hawkish stance on interest rates, stating that he sees no immediate need for rate cuts and warning that the central bank is prepared to raise rates again if data suggests that inflationary pressures are accelerating.
Technical Analysis: Gold Price Targets Reclaiming $2,400
The price of gold is falling while trying to stay above the important level of $2,400. It’s not going up much because the Federal Reserve’s hinting that they might not lower interest rates is holding it back. But, there’s still interest from buyers because of uncertainties in the world.
Gold’s price hasn’t changed much lately, and some indicators that show how strong the buying or selling pressure is are calming down after being really high. For example, the 14-period Relative Strength Index (RSI) on the daily chart is slightly lower after reaching a high point around 85.00. However, overall, there’s still good demand for gold because the RSI is in a range that suggests buyers are still interested.
If the price drops further, key support levels to watch out for are the low price from April 5 near $2,268 and the high price from March 21 at $2,223. These levels might stop the price from falling further.
