- Gold price scales higher for the second straight day and climbs to over a one-week high on Monday.
- Escalating geopolitical tensions in the Middle East provide a strong lift to the safe-haven XAU/USD.
- Hawkish Fed expectations, elevated US bond yields underpin the USD and cap gains for the metal.
Gold price (XAU/USD) witnessed a dramatic intraday turnaround on Friday and rallied over 1.3% from the $1,810 area, or its lowest level since March 8 touched in the aftermath of the United States (US) monthly jobs data. The US Nonfarm Payrolls (NFP) report, meanwhile, reaffirmed bets for at least one more rate hike by the Federal Reserve (Fed) in 2023 and weighed on the precious metal.
Additional details of the report, however, revealed that wage growth remained moderate during the reported month and eased inflationary concerns, which might force the Fed to soften its hawkish stance. This, in turn, dragged the US Dollar (USD) lower for the third successive day, which prompted aggressive short-covering around the Gold price and allowed it to snap a nine-day losing streak.
Adding to this, escalating geopolitical tensions in the Middle East assisted the XAU/USD to open with a bullish gap and advance to over a one-week top on the first day of a new week. That said, the emergence of fresh USD buying keeps a lid on any further appreciating move for the Gold price. Traders now look to this week's release of the FOMC meeting minutes and the US consumer inflation figures.
Daily Digest Market Movers: Gold price fails to build on its strength amid reviving USD demand
- The US NFP report showed on last Friday that the economy added 336K jobs in September, much higher than anticipated, and the previous month's reading was also revised higher to 227K from 187K.
- Average Hourly Earnings rose by 0.2% during the reported month, matching a similar gain in August, and advanced by 4.2% over the 12 months through September as compared to the 4.3% previous.
- The markets are still pricing in the possibility of at least one more Fed rate hike move by the year-end, which remains supportive of elevated US bond yields and continues to underpin the US Dollar.
- Geopolitical tensions trigger a fresh wave of the global risk-aversion sentiment, which assists the safe-haven Gold price to scale higher for the second straight day and climb to over a one-week high.
- The conflict between Israel and Palestine escalated to unforeseen levels after Hamas, a Palestinian militant group, launched an unprecedented attack on Israel and fired a barrage of rockets on Saturday.
- Furthermore, Palestinian militants infiltrated Israeli territory in multiple locations. In response, Israel launched airstrikes on Gaza and declared war against the Palestinian enclave of Gaza on Sunday.
- The development raises the risk of a wider Middle East conflict and boosts demand for traditional safe-haven assets, which, in turn, is seen as a key factor benefitting the precious metal.
- The emergence of fresh USD buying caps the upside for XAU/USD as traders look to the FOMC meeting minutes and the US consumer inflation figures for cues about the Fed's future rate-hike path.
Technical Analysis: Gold price consolidates its bullish weekly gap opening near a one-week high
The strong move-up witnessed over the past two trading sessions might still be categorized as a technical bounce on the back of the oversold Relative Strength Index (RSI) on the daily chart. That said, the occurrence of a death cross, with the 50-day Simple Moving Average (SMA) falling below the very important 200-day SMA for the first time since July 2022, suggests that the path of least resistance for the Gold price is still to the downside. Hence, any subsequent move up might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly.
From current levels, momentum beyond the daily peak, around the $1,855-1,856 region, is likely to confront stiff resistance near the $1,865 zone. Some follow-through buying, however, has the potential to lift the Gold price further towards the next relevant hurdle near the $1,885 area. This is closely followed by the $1,900 round figure, which should now act as a key pivotal point for short-term traders. On the flip side, the $1,835-1,834 region now seems to protect the immediate downside, below which the XAU/USD could slide to the $1,820 support en route to the multi-month low, around the $1,810 zone.
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 New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.29% | 0.36% | -0.01% | 0.18% | -0.01% | -0.04% | 0.20% | |
| EUR | -0.31% | 0.07% | -0.28% | -0.12% | -0.29% | -0.32% | -0.08% | |
| GBP | -0.35% | -0.07% | -0.35% | -0.21% | -0.36% | -0.41% | -0.15% | |
| CAD | 0.01% | 0.28% | 0.35% | 0.18% | 0.00% | -0.03% | 0.21% | |
| AUD | -0.17% | 0.15% | 0.21% | -0.14% | -0.14% | -0.20% | 0.06% | |
| JPY | 0.00% | 0.31% | 0.37% | 0.02% | 0.13% | -0.07% | 0.22% | |
| NZD | 0.06% | 0.34% | 0.43% | 0.05% | 0.19% | 0.06% | 0.27% | |
| CHF | -0.22% | 0.11% | 0.17% | -0.19% | -0.05% | -0.21% | -0.25% |
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
What does the Federal Reserve do, how does it impact the US Dollar?
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.
How often does the Fed hold monetary policy meetings?
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.
What is Quantitative Easing (QE) and how does it impact USD?
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.
What is Quantitative Tightening (QT) and how does it impact 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.
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