Forex Today: Gold surges to new record high on Easter Monday
Here is what you need to know on Monday, April 1:
Although the action in foreign exchange markets remain subdued on Easter Monday, Gold gathers bullish momentum following the long weekend. The US economic docket will feature February Construction Spending data and the ISM Manufacturing PMI report for March later in the day. The Bank of Canada will publish its Business Outlook Survey.
The data published by the US Bureau of Economic Analysis on Easter Friday showed that the Personal Consumption Expenditures (PCE) Price Index and the core PCE Price Index both rose 0.3% on a monthly basis in February. While participating in a discussion at the Macroeconomics and Monetary Policy Conference in San Francisco late on Friday, Federal Reserve Chairman Jerome Powell said that the US economy was strong without question and added that the latest core inflation numbers showed "real progress." The US Dollar Index stays in a consolidation phase near 104.50 in the European morning after closing the previous week marginally higher.
US Dollar price in the last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.19% | -0.20% | -0.60% | -0.15% | 0.04% | 0.10% | 0.40% | |
| EUR | -0.18% | -0.39% | -0.79% | -0.33% | -0.16% | -0.04% | 0.21% | |
| GBP | 0.19% | 0.38% | -0.40% | 0.07% | 0.22% | 0.35% | 0.59% | |
| CAD | 0.59% | 0.78% | 0.39% | 0.46% | 0.62% | 0.75% | 0.98% | |
| AUD | 0.15% | 0.33% | -0.05% | -0.45% | 0.17% | 0.25% | 0.54% | |
| JPY | -0.03% | 0.17% | -0.14% | -0.62% | -0.16% | 0.09% | 0.37% | |
| NZD | -0.16% | 0.08% | -0.30% | -0.70% | -0.26% | -0.09% | 0.28% | |
| CHF | -0.40% | -0.21% | -0.60% | -1.00% | -0.53% | -0.36% | -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).
After rising nearly 3% in the previous week, Gold extended its rally at the beginning of the week and reached a new all-time high above $2,260. In the meantime, the benchmark 10-year US Treasury bond yield struggles to gain traction and stays near 4.2%, allowing XAU/USD to continue to stretch higher. Following Powell's comments and PCE inflation data, the CME FedWatch Tool shows that investors are pricing in a nearly 70% probability that the Fed will lower the policy rate by 25 basis points in June.
Gold price stands tall near record high as US PCE data reaffirms June Fed rate cut bets.
EUR/USD closed flat on Friday and started the new week in a quiet manner. The pair was last seen fluctuating in a narrow channel slightly below 1.0800.
GBP/USD fell about 1% for the second consecutive time last week but stabilized above 1.2600.
USD/JPY continues to move sideways below 151.50 early Monday. Japanese Finance Minister Shunichi Suzuki offered some verbal intervention earlier in the day, saying that the speculative moves are seen behind the recent weak Japanese Yen and added that he will not rule out any steps to respond to disorderly foreign exchange moves.
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.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
