- Gold retreats slightly but remains bullish, balancing between risk sentiment and US Treasury yields.
- The decline in NFIB Small Business Optimism highlights cautious economic outlook.
- Federal Reserve's rate cut expectations and cautious stance underpin market sentiment.
Gold prices retreated on Tuesday after refreshing all-time highs reached $2,365 during the overnight session for North American traders. The yellow metal trimmed earlier gains amid a risk-on impulse and falling US Treasury yields, while the Greenback takes a breather after dropping 0.16% on Monday. The XAU/USD trades at $2,346, gaining some 0.35%
The US economic calendar was scarce, except for the poll of the National Federation of Independent Business (NFIB) Small Optimism Index for March fell for the third straight month from 89.4 to 88.5. Aside from this, market participants are awaiting Wednesday’s busy schedule with the release of the US Consumer Price Index (CPI) alongside the Federal Open Market Committee (FOMC) Minutes.
In the meantime, Fed officials remain optimistic that they will cut rates but emphasize the need to be patient.
Daily digest market movers: Gold trims gains amid high US yields
- The US Consumer Price Index (CPI) for March is expected to rise 0.3% MoM, below February’s 0.4%, but higher than the 0.17% pace needed to curb inflation to the 2% goal. On an annual basis, the CPI is expected to rise from 3.2% to 3.4%.
- Underlying inflation, also known as core CPI, is expected to dip from 0.4% to 0.3% MoM and from 3.8% to 3.7% YoY.
- Strong price pressure may dampen expectations for rate cuts in June, whereas softer inflation figures could fuel speculation for rate reductions.
- Last week’s stronger-than-expected jobs report kept interest rate investors skeptical of a Fed rate cut in June’s meeting, with odds tumbling from around 70%.
- The CME FedWatch Tool depicts traders remaining slightly more optimistic than Monday, with odds for a 25-basis-point rate cut in June up from 52% to 57.8%.
- World Gold Consortium reveals that the People’s Bank of China was the largest buyer of the yellow metal, increasing its reserves by 12 tonnes to 2,257 tonnes.
Technical analysis: Gold’s advance stalls near $2,350 as bulls take a breather
Gold’s rally paused close to $2,350 as the Relative Strength Index (RSI) hit 84.23, its highest level since March 8. This indicates that the RSI is overbought and that the yellow metal is getting less appealing to investors.
If Gold prices dip below the $2,350 area, that will expose the April 8 daily low of $2,303. Once surpassed, that could put downward pressure on the yellow metal and drive it to March’s 21-session high of $2,222. Further losses are seen at $2,200.
On the other hand, if XAU/USD resumes its rally, buyers are eyeing $2,400 and beyond.
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD retreats from daily highs, holds above 1.0800
EUR/USD loses traction but holds above 1.0800 after touching its highest level in three weeks above 1.0840. Nonfarm Payrolls in the US rose more than expected in June but downward revisions to May and April don't allow the USD to gather strength.
GBP/USD struggles to hold above 1.2800 after US jobs data
GBP/USD spiked above 1.2800 with the immediate reaction to the mixed US jobs report but retreated below this level. Nonfarm Payrolls in the US rose 206,000 in June. The Unemployment Rate ticked up to 4.1% and annual wage inflation declined to 3.9%.
Gold approaches $2,380 on robust NFP data
Gold intensifies the bullish stance for the day, rising to the vicinity of the $2,380 region following the publication of the US labour market report for the month of June. The benchmark 10-year US Treasury bond yield stays deep in the red near 4.3%, helping XAU/USD push higher.
Crypto Today: Bitcoin, Ethereum and Ripple lose key support levels, extend declines on Friday
Crypto market lost nearly 6% in market capitalization, down to $2.121 trillion. Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) erased recent gains from 2024.
French Elections Preview: Euro to “sell the fact” on a hung parliament scenario Premium
Investors expect Frances's second round of parliamentary elections to end with a hung parliament. Keeping extremists out of power is priced in and could result in profit-taking on Euro gains.