- Gold price extends Friday’s upswing, recording a new all-time-high near $2,440.
- The US Dollar struggles amid negative US Treasury bond yields and an upbeat mood.
- Gold price closes on the overbought territory on the daily chart, awaits Fedspeak.
Gold price is off a new lifetime high at $2,441 but looks to extend Friday’s upswing at the start of the week on Monday. The US Dollar (USD) is struggling alongside the US Treasury bond yields, as risk sentiment remains in a sweeter spot on China’s stimulus measures.
Gold price gains on China’s support, Fed rate cut bets
However, market participants refrain from placing fresh bets on the Gold price, anticipating a slew of speeches from the US Federal Reserve (Fed) policymakers, which could offer fresh cues on the central bank’s path forward on interest rates.
Gold buyers continue to capitalize on Fed Chair Jerome Powell’s last week's speech, where he affirmed that an interest rate hike is not on the table. Meanwhile, bets of two 25 basis points (bps) interest rate hikes this year keep Gold price on an upward trajectory.
Additionally, China, a top Gold consumer, announced "historic" steps to stabiilze the crisis-hit property sector on Friday, contributing to the upside in Gold price. Topping up to the constructive outlook for Gold price, the recent official data published by the People’s Bank of China (PBOC) showed that the central bank ramped up its Gold reserves for the 18th straight month in Apri.
Furthermore, concerns about the alleged death of Iran’s President Ebrahim Raisi aboard the crashed Iranian helicopter are keeping investors on the edge, fuelling the safe-haven demand for Gold price.
But the rally in Gold price has stalled, as traders turn cautious amid expectations of a profit-taking decline in the bright metal ahead of Fedspeak later on Monday.
Gold price technical analysis: Daily chart
As observed on the daily chart, the 14-day Relative Strength Index (RSI) is heading toward the overbought region, currently near 68.00, suggesting that there is some room for upside.
Gold buyers must find acceptance above the record high of $2,441 if the $2,450 psychological level needs to be tested.
A sustained move above the latter could open doors for a fresh rally toward $2,500.
However, if Gold sellers defend the $2,450 barrier, a retracement toward the $2,400 round figure remains on the card.
The next relevant supports are seen at Friday’s low of $2,374, followed by the 21-day Simple Moving Average (SMA) at $2,340.
Gold FAQs
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.
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.
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.
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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