- Gold price edges lower, snaps a three-day uptick, as mid-tier US data awaited.
- US Dollar and US Treasury yields firm up, despite a mixed market sentiment.
- Gold price eyes acceptance above $2,200 and Friday’s US Core PCE inflation.
Gold price is duplicating the move seen in Wednesday’s Asian trading, as it edges lower below $2,200 early Thursday. Gold price capitalizes on sustained US Dollar (USD) strength and a rebounding US Treasury bond yields struggle, as traders take account of the latest hawkish US Federal Reserve (Fed) commentary.
Gold price slips on Fed Waller’s hawkish comments
Earlier in the Asian session, Fed Governor Christopher delivered a hawkish message while speaking about monetary policy at the Economic Club of New York. His comments fuelled a fresh uptick in the US Treasury bond yields and added to the US Dollar upside while weighing on the non-interest-bearing Gold price.
Waller said "there is no rush to cut the policy rate,” adding that the “Fed may need to maintain current rate target for longer than expected.” Markets are now pricing about a 64% probability that the Fed will begin cutting rates in June, down from a 70% chance seen a day ago.
The mixed trading in Asian stock markets, despite a Wall Street rally overnight, also lends support to the safe-haven US Dollar, Investors stay cautious amid a probable Japanese forex market intervention, as the USD/JPY pair remains on its way to the 34-year high of 151.97 reached Wednesday. Japan’s Chief Cabinet Secretary Yoshimasa Hayashi warned Thursday that the administration would not rule out any options to counter against excessive currency moves.
In case of an FX intervention by the Japanese authorities, USD/JPY is likely to come under intense selling pressure on a Yen rally, smashing the US Dollar alongside. Gold price could subsequently resume its uptrend toward the all-time high of $2,223.
However, a sense of caution ahead of Good Friday’s US PCE Price Index data could limit the Gold price action. Attention now turns toward the final Q4 Gross Domestic Product (GDP) estimate from the US alongside the weekly Jobless Claims, Pending Home Sales and Personal Spending data due later on Thursday for fresh hints on the timing and scope of the Fed interest rate cuts.
Gold price technical analysis: Daily chart
The short-term technical outlook for Gold price leans in favor of buyers with ‘buy-the-dip’ trading likely to continue.
As the Bull Flag remains in play, Gold price keeps the measured target at $2,251 in sight.
Before that level, Gold price needs to recapture the $2,200 threshold on a daily closing basis. Acceptance above that level will put the record high at $2,223 at risk.
The 14-day Relative Strength Index (RSI), is flirting with the overbought threshold, suggesting that there is enough room for the upside.
On the flip side, any retracement will likely find immediate support at the March 22 low of $2,157, where the bullish 21-day Simple Moving Average (SMA) aligns.
Further down, the $2,147 support will be a tough nut to crack for Gold sellers. The last line of defense for Gold buyers is seen at the $2,140 round figure.
(This story was corrected on March 28 at 09:35 GMT to say that "Gold price is duplicating the move seen in Wednesday’s Asian trading, as it edges lower below $2,200 early Thursday, not early Wednesday.)
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.
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