
- Gold price attracts some buyers for the second straight day amid sliding US bond yields.
- Geopolitical risks and the uncertain global economic outlook further benefit the metal.
- Delayed Fed rate cut bets cap the upside ahead of the release of the US PCE Price Index.
Gold price (XAU/USD) sticks to a mildly positive bias heading into the European session on Friday, though remains well within the striking distance of the weekly low touched the previous day. Traders opt to wait on the sidelines ahead of the US Personal Consumption Expenditures (PCE) Price Index, due for release later today. The crucial inflation data might provide some cues about the Federal Reserve’s (Fed) future policy decisions, which, in turn, will drive the US Dollar (USD) demand and provide some meaningful impetus to the non-yielding yellow metal.
Heading into the key data risk, a further decline in the US Treasury bond yields keeps the USD on the defensive below its highest level since December 13 touched on Wednesday and acts as a tailwind for the Gold price. Apart from this, the risk of a further escalation of geopolitical tensions in the Middle East and the uncertain global economic outlook also lend support to the safe-haven precious metal. That said, diminishing odds for a more aggressive Fed policy easing in 2024 hold back bullish traders from placing fresh bets around the XAU/USD and cap gains.
Daily Digest Market Movers: Gold price awaits US PCE Price Index for cues about Fed’s rate-cut path
- The benchmark 10-year US Treasury yield retreats further from over a one-month high touched last week and lends support to the Gold price for the second straight day on Friday.
- Data released on Thursday showed that the US economy expanded at an annual rate of 3.3% during the fourth quarter of 2023, beating consensus estimates for a reading of 2.0%.
- Further details of the report indicated that the core PCE Price Index was unchanged during the September-December period, suggesting that inflation pressures are receding.
- This validated the view that the world’s largest economy is more likely to avoid a recession and overshadowed a rise in the US Weekly Initial Jobless Claims, to 214K last week.
- Separately, the US Census Bureau reported that US Durable Goods Orders were flat in December, while new orders excluding transportation and defense increased 0.3%.
- Investors remain worried that the Israeli-Hamas war could trigger a broader regional conflict as multiple nations and armed groups continue targeting each other’s territories.
- Adding to this, economists expect the global economy to weaken in 2024, which, in turn, is seen as another factor acting as a tailwind for the safe-haven precious metal.
- Market participants, meanwhile, remain uncertain over the timing of when the Federal Reserve will start lowering borrowing costs amid a still-resilient domestic economy.
- Traders now look to the US Personal Consumption Expenditures Price Index for cues about the Fed’s future policy decisions and determine the near-term trajectory for the XAU/USD.
Technical Analysis: Gold price hangs near weekly low touched on Thursday, remains vulnerable
From a technical perspective, any subsequent move up might continue to confront stiff resistance near the $2,040-2,042 supply zone. Some follow-through buying, however, might trigger a short-covering rally and lift the Gold price further to the $2,077 intermediate hurdle en route to the $2,100 round-figure mark.
On the flip side, the weekly low, around the $2,011 area, could offer some support ahead of the $2,000 psychological mark. A convincing break below the latter will be seen as a fresh trigger for bearish traders and pave the way for a slide to the 100-day Simple Moving Average (SMA), currently around the $1,975-1,976 area. The Gold price could eventually drop to test the very important 200-day SMA, near the $1,964-1,963 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 Australian Dollar.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | 0.01% | -0.03% | -0.08% | -0.12% | -0.08% | -0.01% | -0.05% | |
EUR | -0.01% | -0.04% | -0.08% | -0.15% | -0.08% | -0.02% | -0.06% | |
GBP | 0.03% | 0.04% | -0.05% | -0.10% | -0.03% | 0.04% | -0.02% | |
CAD | 0.07% | 0.09% | 0.04% | -0.06% | -0.01% | 0.07% | 0.03% | |
AUD | 0.14% | 0.15% | 0.10% | 0.06% | 0.07% | 0.14% | 0.09% | |
JPY | 0.07% | 0.08% | 0.06% | 0.00% | -0.06% | 0.08% | 0.04% | |
NZD | 0.01% | 0.02% | -0.03% | -0.07% | -0.13% | -0.09% | -0.05% | |
CHF | 0.05% | 0.06% | 0.01% | -0.03% | -0.09% | -0.03% | 0.05% |
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
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.
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.
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.
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.