- Gold price edges lower amid some profit-taking ahead of Fed Chair Powell’s statement.
- Bets for a June Fed rate cut undermine the USD and lend support to the XAU/USD.
- Geopolitical risks and China’s economic woes also limit losses for the safe-haven metal.
Gold price (XAU/USD) trades with a mild negative bias during the early part of the European session on Wednesday, albeit lacks follow-through remains well within the striking distance of the all-time peak. Traders opt to lighten their bullish bets after the recent rally witnessed over the past week or so and ahead of the Federal Reserve (Fed) Chair Jerome Powell's congressional testimony. Powell's remarks will be scrutinized closely for cues about the Fed's rate-cut path, which will influence the USD price dynamics and provide a fresh directional impetus to the non-yielding yellow metal.
Traders on Wednesday will also confront the release of the US ADP report on private-sector employment and JOLTS Job Openings data, due later during the early North American session. In the meantime, growing acceptance that the Federal Reserve (Fed) will start cutting interest rates in June, along with Tuesday's disappointing US macro data, keeps the USD bulls on the defensive and continues to act as a tailwind for the Gold price. Apart from this, geopolitical tensions and concerns about a slowdown in China should contribute to limiting the downside for the safe-haven XAU/USD.
Daily digest market movers: Gold price ticks lower amid some repositioning ahead of Fed Chair Powell's testimony
- Weaker US economic data released on Tuesday reaffirmed market expectations that the Federal Reserve will cut interest rates sooner rather than later and lifted the Gold price back closer to the all-time peak.
- The Institute for Supply Management (ISM) reported that economic activity in the services sector expanded in February for the 14th consecutive month, albeit at a slower pace amid a decline in employment.
- Separately, data published by the US Commerce Department's Census Bureau showed that total Factory Orders fell by 3.6% MoM (-2.0% YoY) in January following a 0.3% decline in the previous month.
- Apart from this, persistent geopolitical tensions and China's economic woes tempered investors' appetite for riskier assets and further contributed to driving flows towards the perceived safe-haven precious metal.
- Bulls, meanwhile, opt to lighten their positions ahead of Fed Chair Jerome Powell's congressional testimony, which will offer clarity on the interest rate path and provide a fresh impetus to the XAU/USD.
- According to the CME Group's FedWatch tool, the markets are pricing in a 70% chance that the Fed will start cutting rates by June, keeping the US Dollar bulls on the defensive and limiting the downside for the commodity.
- Traders on Wednesday will further take cues from the release of the US ADP report on private-sector employment and JOLTS Job Openings data ahead of the closely-watched Nonfarm Payrolls report on Friday.
Technical analysis: Gold price pulls back from the vicinity of YTD top amid overbought RSI, downside seems limited
From a technical perspective, the Relative Strength Index (RSI) on the daily chart is already flashing overstretched conditions and warrants some caution for bullish traders. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before positioning for any further near-term appreciating move for the Gold price.
That said, any corrective slide is likely to find decent support near the $2,100 round figure. Any further decline might still be seen as a buying opportunity and remain limited near the $2,064-2,062 strong horizontal resistance breakpoint. The latter should act as a key pivotal point, which if broken decisively will suggest that the XAU/USD has topped out and shift the near-term bias in favour of bearish traders.
On the flip side, the $2,142-2,144 area, or the all-time peak retested on Tuesday, could offer some resistance and cap the upside for the Gold price. Some follow-through buying will push the yellow metal to uncharted territory and pave the way for a further near-term appreciating move, possibly towards the $2,200 psychological mark.
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 | 0.05% | 0.05% | -0.06% | -0.09% | -0.05% | 0.03% | 0.12% | |
| EUR | -0.05% | 0.00% | -0.09% | -0.11% | -0.09% | -0.01% | 0.08% | |
| GBP | -0.06% | -0.01% | -0.11% | -0.13% | -0.09% | -0.02% | 0.07% | |
| CAD | 0.06% | 0.10% | 0.12% | -0.02% | 0.00% | 0.07% | 0.19% | |
| AUD | 0.09% | 0.15% | 0.11% | 0.02% | 0.04% | 0.11% | 0.21% | |
| JPY | 0.05% | 0.09% | 0.07% | -0.01% | -0.04% | 0.08% | 0.14% | |
| NZD | -0.05% | 0.02% | 0.00% | -0.09% | -0.12% | -0.08% | 0.10% | |
| CHF | -0.12% | -0.07% | -0.07% | -0.17% | -0.20% | -0.15% | -0.08% |
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
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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