- Gold price recovers despite the renewed USD demand on Wednesday.
- Investors place lower bets on the potential Fed interest rate cuts in 2024.
- The Fed’s (Fed) Philip Jefferson, Susan Collins, and Lisa Cook are scheduled to speak later on Wednesday.
Gold price (XAU/USD) attracts some buyers during the Asian trading hours on Wednesday. Safe-haven demand, fueled by geopolitical tensions and uncertainty, as well as ongoing central bank purchases, might contribute to a rally in gold. Nonetheless, the hawkish remarks from Federal Reserve (Fed) officials might dampen hopes for potential interest rate cuts in 2024, despite weaker-than-expected US employment reports in April. This, in turn, might drag the precious metal lower.
Later on Wednesday, the Federal Reserve’s (Fed) Philip Jefferson, Susan Collins, and Lisa Cook are set to speak. The hawkish remarks from the Fed policymakers might lift the Greenback and weigh on the USD-denominated gold. Gold traders will monitor the consumer sentiment reading from the University of Michigan on Friday.
Daily Digest Market Movers: Gold price remains firm amid the uncertainties
- Minneapolis Fed Bank President Neel Kashkari said on Tuesday that it is too early to declare that inflation has stalled out, and the Fed might cut interest rates this year if price pressures ease.
- Richmond Fed President Thomas Barkin said the current level of interest rates is restrictive enough to cool the economy and bring inflation back to the 2% target.
- Financial markets are now pricing in nearly 50 basis points (bps) of rate cuts from the Fed this year, including a 65.7% odds of a rate cut of at least 25 bps in September, according to CME’s FedWatch Tool.
- The preliminary University of Michigan Consumer Sentiment Index will be released on Friday, which is estimated to drop from 77.2 in April to 76.0 in May.
- Israeli troops launched strikes on Gaza’s southernmost city. Even though Hamas agreed to a ceasefire proposal on Monday, Israel said the conditions did not meet its demands, as per the New York Times.
- The People’s Bank of China (PBoC) added 60,000 troy ounces of gold to its reserves in April, extending the period of consecutive purchases to 18 months.
Technical Analysis: Gold price maintains a constructive stance in the longer term
The gold price trades stronger on the day. However, the positive outlook of the yellow metal in the longer term remains unchanged as XAU/USD is above the key 100-day Exponential Moving Average (EMA) with an upward slope.
In the near term, the gold price has been stuck within a descending trend channel since mid-April. The modest bearish stance is confirmed by the 14-day Relative Strength Index (RSI), which holds below the 50 midline.
The $2,300 psychological round figure will be the first downside target for XAU/USD. Any follow-through selling below this level will expose the lower limit of a descending trend channel at $2,260. A bearish breakout of the mentioned level will pave the way to a low of April 1 at $2,228, followed by the $2,200 round mark.
On the upside, the immediate barrier will emerge near a high of May 6 at $2,232. The next hurdle is located near the confluence of the upper boundary of a descending trend channel and a high of April 26 at the $2,350–$2,355 region. The additional upside filter to watch is the $2,400 round mark, en route to an all-time high near $2,432.
US Dollar price in the last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.70% | 0.03% | -0.18% | -1.52% | -1.67% | -1.93% | -1.16% | |
| EUR | 0.70% | 0.73% | 0.53% | -0.80% | -0.95% | -1.21% | -0.45% | |
| GBP | -0.03% | -0.73% | -0.20% | -1.54% | -1.70% | -1.95% | -1.18% | |
| CAD | 0.18% | -0.55% | 0.21% | -1.33% | -1.49% | -1.75% | -0.98% | |
| AUD | 1.50% | 0.80% | 1.51% | 1.32% | -0.17% | -0.40% | 0.35% | |
| JPY | 1.65% | 0.95% | 1.65% | 1.47% | 0.16% | -0.25% | 0.54% | |
| NZD | 1.90% | 1.19% | 1.91% | 1.73% | 0.41% | 0.26% | 0.76% | |
| CHF | 1.13% | 0.44% | 1.17% | 0.96% | -0.33% | -0.56% | -0.76% |
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).
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.