Gold price consolidates above monthly low as traders awaits US CPI on Tuesday
|- Gold price struggles to lure buyers amid hawkish Fed expectations and easing geopolitical risks.
- The Fed rate cut uncertainty keeps the USD bulls on the defensive and lends support to the metal.
- Traders keenly await the US consumer inflation figures on Tuesday before placing directional bets.
Gold price (XAU/USD) extends its sideways consolidative price move through the first half of the European session on Monday and remains well within the striking distance of the monthly low touched last week. Expectations that the Federal Reserve (Fed) will keep interest rates higher for longer, bolstered by robust US macro data and hawkish rhetoric from several FOMC members, turn out to be a key factor acting as a headwind for the non-yielding yellow metal. Apart from this, easing fears about a further escalation of geopolitical tensions in the Middle East contributes to capping the upside for the safe-haven commodity.
Investors, meanwhile, remain uncertain about the likely timing and pace of interest rate cuts by the Fed, which, along with a modest downtick in the US Treasury bond yields, lend some support to the Gold prices. Traders further opt to wait on the sidelines ahead of the US consumer inflation figures, due on Tuesday, which could provide cues about the Fed's rate-cut path and provide a fresh impetus to the XAU/USD. In the meantime, speeches by influential FOMC members will drive the USD demand and produce short-term trading opportunities around the precious metal in the absence of any relevant economic data from the US.
Daily Digest Market Movers: Gold price lacks firm intraday direction amid mixed fundamental cues
- Growing acceptance that the Federal Reserve will keep interest rates higher for longer in the wake of a still resilient US economy acts as a headwind for the non-yielding Gold price.
- Moreover, the recent hawkish remarks by a slew of influential FOMC members forced investors to scale back their expectations for early and steep interest rate cuts this year.
- Dallas Fed Bank President Lorie Logan said on Friday that there is no urgency to cut rates and that she wants further evidence on inflation to confirm the progress is durable.
- Atlanta Fed President Raphael Bostic noted that inflation has been too high for too long, and there is still a way to go and that the US is on a path to pre-pandemic economic activity.
- The annual revisions published by the Labor Department showed on Friday that US consumer prices increased slightly more than previously reported in October and November.
- The US Dollar, however, struggles to gain any meaningful traction in the wake of the uncertainty about the likely timing and pace of interest rate cuts by the Fed this year.
- Traders also prefer to wait on the sidelines and look to the latest US consumer inflation figures on Tuesday for cues about the Fed's rate-cut path before placing directional bets.
- Relatively thin trading volumes on the back of holidays in Japan and China further contribute to the subdued range-bound price action on the first day of a new week.
- The Israel military said on Monday that it had concluded a series of strikes in southern Gaza, easing fears about broadening the Israel-Palestinian conflict across the Middle East.
Technical Analysis: Gold price awaits a breakout through a short-term range before the next leg of a directional move
From a technical perspective, last week's swing low, around the $2,015 area, is likely to protect the immediate downside ahead of the $2,000 psychological mark. Given that oscillators on the daily chart have again started gaining negative traction, a convincing break below the latter will be seen as a fresh trigger for bearish traders and pave the way for deeper losses. The Gold price might then accelerate the slide towards the 100-day Simple Moving Average (SMA), currently around the $1,988 zone before dropping to the very important 200-day SMA, near the $1,966-1,965 region.
On the flip side, the 50-day SMA, around the $2,033 area, could act as an immediate hurdle ahead of last week's swing high, near the $2,044-2,045 area. This is followed by the $2,065 region, or the monthly peak, which if cleared decisively will negate the near-term negative outlook. The Gold price might then accelerate the positive move towards retesting the YTD peak, near the $2,078-2,079 touched in January. The subsequent move up has the potential to lift the XAU/USD to the $2,100 mark en route to the next relevant hurdle near the $2,120 region.
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 New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.05% | 0.05% | 0.02% | 0.05% | 0.05% | 0.29% | 0.03% | |
| EUR | -0.05% | 0.01% | -0.02% | 0.04% | 0.00% | 0.24% | -0.01% | |
| GBP | -0.05% | 0.00% | -0.02% | 0.01% | 0.00% | 0.24% | -0.01% | |
| CAD | -0.02% | 0.02% | 0.03% | 0.03% | 0.03% | 0.26% | 0.01% | |
| AUD | -0.06% | -0.01% | -0.01% | -0.04% | -0.01% | 0.23% | -0.03% | |
| JPY | -0.05% | -0.01% | 0.04% | -0.03% | 0.01% | 0.23% | -0.02% | |
| NZD | -0.29% | -0.24% | -0.23% | -0.26% | -0.23% | -0.23% | -0.25% | |
| CHF | -0.05% | -0.01% | 0.01% | -0.03% | 0.00% | 0.00% | 0.24% |
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).
Gold FAQs
Why do people invest in Gold?
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Who buys the most Gold?
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
How is Gold correlated with other assets?
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
What does the price of Gold depend on?
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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