- Gold price struggles to capitalize on its modest recovery gains, despite a softer USD.
- A fresh leg up in the US bond yields limits the USD losses and caps gains for the metal.
- Traders also seem reluctant to place bullish bets ahead of the US NFP report on Friday.
Gold price (XAU/USD) attracts some buyers on Thursday, albeit struggles to capitalize on the intraday recovery move and meets with a fresh supply near the $1,830 area during the early European session. The precious metal did get a minor lift in the wake of the ongoing pullback in the benchmark 10-year US Treasury bond yields from a 16-year peak, which drags the US Dollar (USD) away from its recent high. Traders, however, seem reluctant to place aggressive bullish bets and prefer to wait for more clarity about the Federal Reserve’s (Fed) next policy move.
A report published by Automatic Data Processing (ADP) on Wednesday shows signs of a cooling labor market in the United States (US). Furthermore, a survey from the Institute for Supply Management (ISM) indicated a moderation in the US services sector, giving the Fed some incentive to stop raising interest rates. This triggers a corrective decline in the US bond yields and prompts traders to lighten their USD bullish bets. The US macro data remains consistent with expectations for solid economic growth in the third quarter and should allow the Fed to keep rates higher for longer.
Moreover, the recent comments by several Fed officials backed the case for further policy tightening to bring inflation back to the 2% target, keeping the door open for at least one more Fed rate hike in 2023. This acts as a tailwind for the US bond yields and helps limit the USD corrective decline, which, in turn, is seen capping the upside for the non-yielding Gold price. Hence, it will be prudent to wait for strong follow-through buying before confirming that the XAU/USD has formed a near-term bottom and positioning for further appreciating move.
Traders might also prefer to wait on the sidelines ahead of the release of the closely-watched US monthly employment details on Friday. The popularly known NFP report will play a key role in influencing expectations about the Fed’s future rate-hike path, which, in turn, will drive the USD demand in the near term and provide a fresh directional impetus to the Gold price. Heading into the key data risk, the US Weekly Initial Jobless Claims data will be examined for short-term opportunities later during the early North American session this Thursday.
Daily Digest Market Movers: Gold price continues with its struggle to register any meaningful recovery
- Gold price attempted a modest intraday recovery from its lowest level since March, though the uptick runs out of steam near the $1,830 level during the early European session.
- The benchmark 10-year US Treasury yield remains elevated near the 16-year top touched on Tuesday and helps limit the USD corrective slide from its highest level since November 2022.
- The US ADP report showed that private-sector employers added 89K jobs in September as compared to the previous month’s upwardly revised reading of 180K.
- The US ISM Services PMI declined from 54.5 to 53.6 in September, forcing investors to trim their bets for one more Fed rate hike move by the end of this year.
- The Fed is still expected to stick to its hawkish stance and keep interest rates higher for longer, which, in turn, keeps a lid on any meaningful recovery for the XAU/USD.
- The US NFP report will now be looked upon for cues about the Fed’s future rate-hike path and should help determine the next leg of a directional move for the metal.
Technical Analysis: Gold price remains vulnerable to extend its recent downward trajectory
From a technical perspective, the lack of any follow-through buying and the emergence of fresh selling at higher levels suggests that the path of least resistance for the Gold price is to the downside. Hence, a subsequent slide back towards testing the $1,815, or a multi-month low touched on Tuesday, looks like a distinct possibility. The next relevant support is pegged near the $1,800 round-figure mark, which if broken decisively will expose the next relevant support near the $1,770-1,760 region.
On the flip side, the daily swing high, around the $1,830 zone, now seems to act as an immediate strong resistance. A sustained strength beyond, however, might trigger a short-covering rally and lift the Gold price to the $1,850 resistance en route to the $1,858-1,860 barrier. On the flip side, the $1,815, or a multi-month low seems to have emerged as an immediate strong support. This is followed by the $1,800 round-figure mark, which if broken decisively will expose the next relevant support near the $1,770-1,760 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 strongest against the .
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | 0.03% | 0.02% | 0.06% | -0.18% | 0.01% | -0.13% | 0.09% | |
EUR | -0.04% | 0.00% | 0.02% | -0.23% | -0.02% | -0.17% | 0.05% | |
GBP | -0.01% | 0.01% | 0.04% | -0.21% | -0.01% | -0.14% | 0.07% | |
CAD | -0.06% | -0.03% | -0.03% | -0.24% | -0.05% | -0.19% | 0.03% | |
AUD | 0.18% | 0.22% | 0.22% | 0.24% | 0.20% | 0.07% | 0.28% | |
JPY | -0.02% | 0.03% | 0.05% | 0.03% | -0.17% | -0.11% | 0.08% | |
NZD | 0.09% | 0.16% | 0.17% | 0.22% | -0.07% | 0.16% | 0.21% | |
CHF | -0.09% | -0.06% | -0.06% | -0.03% | -0.27% | -0.07% | -0.21% |
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).
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.