- Gold price rises to near $2,420 as upside risks to Middle East tensions have improved its safe-haven appeal.
- The major trigger for the Gold price will be the Fed’s guidance on interest rates.
- Investors see the Fed leaving interest rates unchanged with a dovish guidance.
Gold price (XAU/USD) exhibits a strong performance in Wednesday’s American session, with investors focusing on the Federal Reserve’s (Fed) monetary policy outcome later the day. The precious metal climbs to near $2,420 as its safe-haven appeal improves amid fears that Middle East tensions would widen further. Historically, investors find investment in precious metals as safe bet amid geopolitical tensions.
Fears of an all-out war between Israel and Iran deepened after reports showed that Hamas leader Ismail Haniyeh was killed in an Israeli air strike on Tehran. This has prompted fears of a retaliation move by Iran, which would diminish hopes of a ceasefire significantly.
Meanwhile, the US Dollar (USD) slides further on downbeat United States (US) ADP Employment data. The report showed that 122K employees were hired in the private sector in July, which was lower than expectations of 150K and the prior release of 155K, upwardly revised from 150K. This points to easing labor market resilience. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, skids below the crucial support of 104.00. 10-year US Treasury yields tumble to a fresh four-month low at 4.11%.
Daily digest market movers: Gold price gains while US Dollar and bond yields slump after weak US ADP Employment data
- Gold price gains further above $2,400 ahead of the Fed policy meeting. The central bank is expected to leave interest rates unchanged in the range of 5.25%-5.50% for the eighth time in a row. As the CME FedWatch tool shows, the decision to maintain a status quo is widely anticipated, and investors will keenly focus on the Fed’s guidance on interest rates.
- In the monetary policy statement and the press conference, Fed Chair Jerome Powell is expected to reiterate that inflation has returned to a path that leads to the bank’s target of 2%. Jerome Powell may also highlight rising risks to the labor market. It would be a tough call for Powell to provide a timeline for rate cuts as the battle against inflation is far from over and the US economy is growing at a robust pace.
- The US labor market strength appears to be moderating due to the long-term maintenance of a restrictive policy framework. The Unemployment Rate in June, at 4.1%, was recorded as the highest in more than two years. Also, JOLTS Job Openings data grew almost steadily in June. Job vacancies in June came in at 8.18 million against expectations of 8.03 million but were lower than the prior release of 8.23 million, suggesting that job demand has moderated.
- According to the CME FedWatch tool, 30-day Federal Funds Futures pricing data shows that the central bank will reduce interest rates by 25 basis points (bps) from their current levels in the September meeting. The data also shows that there will be two rate cuts instead of one, as policymakers projected in the latest Fed dot plot.
- The entire week is expected to remain volatile for the FX domain as two more crucial US data are lined up for release this week. These are the ISM Manufacturing Purchasing Managers’ Index (PMI) and the Nonfarm Payrolls (NFP) for July, which will be published on Thursday and Friday, respectively.
US Dollar Price Today:
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.23% | -0.10% | -1.76% | -0.23% | 0.29% | -0.44% | -0.41% | |
| EUR | 0.23% | 0.15% | -1.51% | -0.01% | 0.50% | -0.19% | -0.18% | |
| GBP | 0.10% | -0.15% | -1.68% | -0.16% | 0.34% | -0.34% | -0.31% | |
| JPY | 1.76% | 1.51% | 1.68% | 1.61% | 2.07% | 1.35% | 1.43% | |
| CAD | 0.23% | 0.00% | 0.16% | -1.61% | 0.49% | -0.21% | -0.18% | |
| AUD | -0.29% | -0.50% | -0.34% | -2.07% | -0.49% | -0.70% | -0.68% | |
| NZD | 0.44% | 0.19% | 0.34% | -1.35% | 0.21% | 0.70% | 0.03% | |
| CHF | 0.41% | 0.18% | 0.31% | -1.43% | 0.18% | 0.68% | -0.03% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Technical Analysis: Gold price stabilizes above $2,400
Gold price trades in a channel formation on a daily timeframe, which is slightly rising but has been broadly exhibiting a sideways performance for more than three months. The 50-day Exponential Moving Average (EMA) near $2,366 continues to provide support to the Gold price bulls.
The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting indecisiveness among market participants.
Fresh upside would appear if the Gold price breaks above its all-time high of $2,483.75, which will send it into unchartered territory.
On the downside, the Gold price will find support near the upward-sloping trendline around $2,225, plotted from October 6 low near $1,810.50.
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.Next release: Wed Jul 31, 2024 18:00
Frequency: Irregular
Consensus: 5.5%
Previous: 5.5%
Source: Federal Reserve
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