- Gold price extends its sideways consolidative price move for the second successive day on Friday.
- Reduced bets for more aggressive policy easing by the Fed seem to cap the upside for the metal.
- Traders also seem reluctant to place aggressive bets ahead of the key US monthly jobs report (NFP).
Gold price (XAU/USD) continues with its struggle to gain any meaningful traction on Friday and remains confined in a narrow trading band below the $2,050 level heading into the European session. Traders seem reluctant to place aggressive directional bets and prefer to wait for the release of the official monthly employment details from the United States (US). The popularly known Nonfarm Payrolls (NFP) report will be looked upon for more clarity on the Federal Reserve’s future policy decisions, which, in turn, will play a key role in determining the near-term trajectory for the non-yielding yellow metal.
Heading into the key data risk, Thursday’s upbeat US labor market reports forced investors to scale back their expectations for a more aggressive policy easing by the US central bank. This remains supportive of elevated US Treasury bond yields, which act as a tailwind for the US Dollar (USD) and cap gains for the Gold price. The downside, however, seems limited in the wake of the prevalent cautious market mood, which tends to benefit the precious metal’s safe-haven status. Nevertheless, the XAU/USD remains well within the striking distance of a one-and-half-week low touched on Wednesday.
Daily Digest Market Movers: Gold price lacks firm direction amid mixed fundamental cues
- Geopolitical risks, along with China’s economic woes, continue to weigh on investors’ sentiment and offer some support to the safe-haven Gold price on Friday.
- The benchmark 10-year US Treasury yield holds steady near 4.0% amid reduced bets for multiple rate cuts by the Federal Reserve and caps the XAU/USD.
- Traders trimmed expectations on the number of rate cuts by the Fed in 2024 to four from six on Wednesday following the release of the upbeat US macro data.
- The Automatic Data Processing (ADP) reported on Thursday that US private-sector employers added 164K jobs in December as against 115K expected.
- Adding to this, a report published by the US Department of Labor (DOL) showed that Weekly Jobless Claims fell more than expected, to 202K last week.
- The US Dollar bulls, meanwhile, seem reluctant to place aggressive bets and prefer to wait for the release of the closely-watched official US monthly jobs data.
- The popularly known Nonfarm Payrolls (NFP) report is expected to show that the economy added 170K new jobs in December vs 199K in the previous month.
- The unemployment rate is anticipated to edge higher to 3.8% from 3.7%, while Average Hourly Earnings growth is seen easing to 3.9% YoY rate from 4.0% in November.
- The crucial employment figures could guide the Fed’s near-term policy outlook, which will influence the USD and provide a fresh impetus to the non-yielding metal.
Technical Analysis: Gold price remains below $2,050 hurdle, bearish potential seems intact
From a technical perspective, any subsequent move up might continue to confront stiff resistance near the $2,050-$2,048 region. The said area should now act as a key pivotal point for intraday traders, which if cleared should lift the Gold price to the next relevant hurdle near the $2,064-2,065 zone. Given that oscillators on the daily chart are still holding in the positive territory, the upward trajectory could get extended further towards the $2,077 region en route to the $2,100 round figure.
On the flip side, the weekly swing low, around the $2,030 zone, seems to protect the immediate downside. This is followed by the 50-day Simple Moving Average (SMA), currently around the $2,011-2,010 region, and the $2,000 psychological mark. A convincing break below the latter will be seen as a fresh trigger for bearish traders and set the stage for the resumption of the downtrend witnessed over the past week or so.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 1.03% | 0.37% | 0.84% | 1.62% | 2.70% | 1.44% | 1.14% | |
| EUR | -0.89% | -0.50% | -0.05% | 0.75% | 1.69% | 0.56% | 0.19% | |
| GBP | -0.38% | 0.50% | 0.48% | 1.25% | 2.41% | 1.06% | 0.69% | |
| CAD | -0.85% | 0.02% | -0.29% | 0.77% | 1.87% | 0.59% | 0.24% | |
| AUD | -1.65% | -0.76% | -1.26% | -0.80% | 0.92% | -0.20% | -0.55% | |
| JPY | -2.76% | -1.71% | -2.32% | -1.69% | -0.93% | -1.13% | -1.68% | |
| NZD | -1.46% | -0.56% | -1.07% | -0.61% | 0.19% | 1.10% | -0.36% | |
| CHF | -1.07% | -0.18% | -0.68% | -0.21% | 0.58% | 1.63% | 0.39% |
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).
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.