- Gold price attracts some buying on Wednesday, albeit struggles to capitalize on the move up.
- Recession fears and geopolitical risks turn out to be key factors lending support to the metal.
- The prospects for further policy tightening by the Fed continue to cap gains for the commodity.
Gold price (XAU/USD) gains some positive traction on Wednesday and move away from the weekly low, around the $1,954-1,953 area touched the previous day. The precious metal manages to hold its neck above the $1,970 level through the first half of the European session and for now, seems to have stalled its recent retracement slide from the vicinity of the $2,000 psychological mark, or a five-month top touched last Friday.
Looming recession risk, fueled by a flurry of weaker economic data from Europe on Tuesday, along with the Middle East conflict, turns out to be another factor lending some support to the safe-haven Gold price. That said, a fresh leg up in the US Treasury bond yields and the emergence of some US Dollar (USD) dip-buying, bolstered by hawkish Federal Reserve (Fed) expectations, cap the upside for the non-yielding yellow metal.
Traders also seem reluctant and prefer to wait for Fed Chair Jerome Powell's speech later during the US session. The focus, meanwhile, remains on the US Core PCE Price Index on Friday, which could provide some meaningful impetus to the commodity.
Daily Digest Market Movers: Gold price continues with its struggle to gain traction
- Gold price attracts some buyers in the wake of retreating US Treasury bond yields, which keeps the US Dollar (USD) bulls on the defensive, and geopolitical risks.
- World leaders pushed for either a pause or ceasefire between Israel and Hamas so that humanitarian aid could be delivered to the besieged Gaza Strip.
- The benchmark 10-year US Treasury yield moves further away from a 16-year peak after crossing the symbolic 5% threshold level for the first time since 2007.
- Business activity in the Euro Zone took a surprise turn for the worse and revived recession fears, which further benefits the safe-haven XAU/USD.
- The US manufacturing sector pulled out of a five-month contraction and services activity accelerated modestly, pointing to a still resilient economy.
- The Fed is expected to maintain the status quo in November, though the markets are pricing in the possibility of one more 25 basis point lift-off by the year-end.
- Investors now look to Fed Chair Jerome Powell's speech for cues about the future rate-hike path, which, in turn, should provide a fresh impetus to the metal.
- The focus will also be on the Advance US Q3 GDP report and the European Central Bank (ECB) rate decision on Thursday, followed by the US PCE price index on Friday.
Technical Analysis: Gold price remains below the $1,982-1,983 pivotal resistance
From a technical perspective, any subsequent move up is likely to confront some resistance near the weekly high, around the $1,982-1,983 region. Some follow-through buying should allow the Gold price to make a fresh attempt to conquer the $2,000 psychological mark. The subsequent move up has the potential to lift the XAU/USD further towards the next relevant hurdle near the $2,022 area.
On the flip side, the $1,964 level now seems to protect the immediate downside ahead of the weekly low, around the $1,953-1,952 zone touched on Tuesday. The latter represents a strong horizontal resistance breakpoint and should act as a pivotal point, below which the Gold price could slide back to the 200-day Simple Moving Average (SMA), currently pegged near the $1,932-1,931 region.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.10% | 0.20% | 0.14% | 0.11% | 0.04% | 0.12% | 0.24% | |
| EUR | -0.10% | 0.10% | 0.03% | 0.02% | -0.06% | 0.02% | 0.13% | |
| GBP | -0.17% | -0.08% | -0.04% | -0.07% | -0.14% | -0.08% | 0.05% | |
| CAD | -0.14% | -0.04% | 0.06% | -0.03% | -0.11% | -0.05% | 0.08% | |
| AUD | -0.11% | -0.01% | 0.07% | 0.04% | -0.08% | -0.01% | 0.13% | |
| JPY | -0.04% | 0.08% | 0.17% | 0.08% | 0.07% | 0.08% | 0.20% | |
| NZD | -0.09% | 0.00% | 0.10% | 0.03% | 0.02% | -0.06% | 0.13% | |
| CHF | -0.25% | -0.14% | -0.05% | -0.11% | -0.13% | -0.21% | -0.14% |
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).
Interest rates FAQs
What are interest rates?
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
How do interest rates impact currencies?
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
How do interest rates influence the price of Gold?
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
What is the Fed Funds rate?
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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