Gold price struggles to capitalize on intraday gains amid US Thanksgiving holiday
|- Gold price regains positive traction on Thursday amid the emergence of fresh USD selling.
- Dovish Fed expectations drag the US bond yields lower and exert some pressure on the buck.
- The XAU/USD needs to move beyond the $2,010 barrier for bulls to seize near-term control.
Gold price (XAU/USD) catches fresh bids on Thursday and sicks to its modest intraday gains through the first half of the European session, albeit tlacks follow-through. The precious metal remains below the $2,000 psychological mark session, warranting caution for bullish traders on the back of the recent repeated failures near the $2,010 horizontal barrier. Traders might also refrain from placing aggressive bets amid a relatively light trading session in the wake of the US Thanksgiving holiday.
The downside for the Gold price, however, remains cushioned in the wake of growing acceptance that the Federal Reserve (Fed) will not hike interest rates further. Moreover, the current market pricing indicates a greater than 50% chance that the Fed will cut rates at the April 30-May 1, 2024 meeting. This, in turn, keeps the yield on the benchmark 10-year US government bond close to a two-month low, which is seen undermining the buck and acting as a tailwind for the non-yielding yellow metal.
Daily Digest Market Movers: Gold price remains supported by Fed rate cut bets
- The emergence of fresh selling around the US Dollar assists the Gold price to regain positive traction during the Asian session on Thursday.
- The hawkish FOMC minutes-inspired USD recovery falters in the wake of expectations that the Federal Reserve (Fed) will not hike rates further.
- Policymakers reiterated the stance to keep rates higher for longer and remain committed to tightening policy further if progress in controlling inflation falters.
- The current market pricing, however, indicates a greater than 50% chance that the US central bank will start cutting interest rates by May 2024.
- Dovish Fed expectations, meanwhile, overshadow the better-than-expected US labor market and consumer sentiment data released on Wednesday.
- The number of Americans filing new claims for unemployment benefits fell more than expected last week, to 209K, or the lowest level in more than a month.
- The University of Michigan's survey of consumer sentiment showed that US consumers' inflation expectations rose for a second straight month in November.
- Other US data showed orders for long-lasting US manufactured goods fell more than expected in October, pointing to slowing economic demand.
- Lighter trading volumes on the back of the US Thanksgiving holiday and repeated failures ahead of the $2,010 level warrant caution for bullish traders.
Technical Analysis: Gold price lacks bullish conviction
From current levels, any subsequent move beyond the $2,000 mark might continue to confront stiff resistance near the $2,007 area. Some follow-through buying, leading to a subsequent breakout through the $2,009-2,010 barrier, or a multi-month peak touched in October, will be seen as a fresh trigger for bullish traders. The Gold price might then accelerate the positive move further towards the $2,022 intermediate resistance en route to the next relevant hurdle near the $2,040 region.
On the flip side, the $1,989-1,988 zone is likely to protect the immediate downside ahead of the $1,979-1,978 region and the weekly low, around the $1,965 area. Failure to defend the said support levels might prompt aggressive technical selling and drag the Gold price back towards the 200-day Simple Moving Average (SMA), currently around the $1,940 level. This is closely followed by the 50- and 100-day SMA confluence, around the $1,933-1,932 region, which if broken decisively might shift the near-term bias in favour of bearish traders.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.17% | -0.16% | -0.13% | -0.26% | -0.31% | -0.59% | -0.13% | |
| EUR | 0.18% | 0.03% | 0.03% | -0.08% | -0.14% | -0.40% | 0.05% | |
| GBP | 0.15% | -0.02% | 0.01% | -0.11% | -0.15% | -0.43% | 0.03% | |
| CAD | 0.14% | -0.03% | -0.03% | -0.15% | -0.16% | -0.45% | 0.01% | |
| AUD | 0.29% | 0.10% | 0.13% | 0.14% | -0.03% | -0.32% | 0.15% | |
| JPY | 0.31% | 0.15% | 0.15% | 0.18% | 0.04% | -0.30% | 0.19% | |
| NZD | 0.58% | 0.41% | 0.43% | 0.43% | 0.31% | 0.25% | 0.46% | |
| CHF | 0.12% | -0.05% | -0.04% | 0.00% | -0.14% | -0.18% | -0.46% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Risk sentiment FAQs
What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
What are the key assets to track to understand risk sentiment dynamics?
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
Which currencies strengthen when sentiment is "risk-on"?
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
Which currencies strengthen when sentiment is "risk-off"?
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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