- Gold price sits at multi-day highs near $2,030 ahead of the Fed Minutes.
- US Dollar stays weak with the US Treasury bond yields, despite a tepid risk tone.
- Gold buyers flex muscles after recapturing 21-day SMA near $2,025. RSI flips bullish.
Gold price is looking to extend its winning streak into a fifth straight day on Wednesday, sitting close to the highest level in five days reached at $2,031 on Tuesday. A sustained US Dollar (USD) weakness combined with subdued US Treasury bond yields render positive for Gold price, as buyers await the US Federal Reserve (Fed) January meeting Minutes for the next push higher.
Gold price braces for Fed Minutes and Fedspeak
The latest leg down in the US Dollar could be attributed to renewed fears of a United States (US) government shutdown. House Republicans have shifted from optimistically cautious to expecting a government shutdown unless a budget or spending stopgap is passed by March 1, according to a report carried by Axios. The government will go into a full shutdown by March 8.
The prolonged fiscal issue in the US is keeping the US Treasury bond yields on the defensive, exerting additional downside pressure on the US Dollar, even as risk sentiment remains tepid. Asian markets opened lower on Wednesday, tracking a negative Wall Street close. However, Chinese stocks have rebounded firmly on hopes of more stimulus coming through from Beijing to prop up the property market and the overall economy.
Gold price is taking advantage of the ongoing US Dollar weakness, looking forward to the release of the Fed’s January meeting Minutes, which could provide fresh hints on the timing of the first-rate cut this year.
in the absence of any high-impact US economic data releases on Tuesday. Also, of note remains the earnings result from the American tech-giant Nvidia on Wednesday, as it could have a significant impact on the market sentiment. Markets are currently pricing a 77% chance of a cut in June, according to the CME Group’s Fed Watch Tool. Markets now expect 92 basis points (bps) of cuts from the Fed this year, closer to the Fed's projection of 75 bps of easing and sharply below the 150 bps of cuts priced in by traders at the start of the year, per Reuters.
Also, of note will be earnings result from the American tech-giant Nvidia on Wednesday, which could have a significant impact on the market sentiment, in turn, influencing the value of the US Dollar and the Gold price. American chipmaker Nvidia stumbled on Tuesday, leading the decline in the US stocks, in anticipation of its earnings report.
Besides, Atlantic Fed President Raphael Bostic and Fed Governor Michelle Bowman will make their respective scheduled appearances later on Wednesday, offering some food for thought for Gold traders.
Gold price technical analysis: Daily chart
Gold price finally yielded a daily closing above the 21-day Simple Moving Average (SMA), now at $2,023, on Tuesday.
The 14-day Relative Strength Index (RSI) extended its recovery above the midline, suggesting that the tide may have turned in favor of Gold buyers.
Therefore, the immediate resistance is now seen at the $2,033 level, where the 50-day SMA and the February 13 high coincide.
A sustained break above that level will generate fresh buying opportunities in Gold price, targeting the February 7 high of $2,044 and the $2,050 psychological barrier.
On the contrary, if Gold sellers fight back control, the 21-day SMA at $2,023 will need to hold the fort. A failure to defend the latter could fuel a fresh downswing toward the previous day low of $2,015, followed by the rising trendline support that aligns at $2,011.
The upwsrd-pointing 100-day SMA at $2,002 will act as a tough nut to crack for Gold sellers.
Gold FAQs
Why do people invest in Gold?
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.
Who buys the most Gold?
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.
How is Gold correlated with other assets?
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.
What does the price of Gold depend on?
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD recovers toward 1.0850 as risk mood improves
EUR/USD gains traction and rises toward 1.0850 on Friday. The improvement seen in risk mood makes it difficult for the US Dollar (USD) to preserve its strength and helps the pair erase a portion of its weekly losses.
GBP/USD stabilizes above 1.2700 after downbeat UK Retail Sales-led dip
GBP/USD staged a rebound and stabilized above 1.2700 after dropping to a weekly low below 1.2680 in the early European session in response to the disappointing UK Retail Sales data. The USD struggles to find demand on upbeat risk mood and allows the pair to hold its ground.
Gold rebounds to $2,340 area, stays deep in red for the week
Gold fell nearly 4% in the previous two trading days and touched its weakest level in two weeks below $2,330 on Thursday. As US Treasury bond yields stabilize on Friday, XAU/USD stages a correction toward $2,340 but remains on track to post large weekly losses.
Dogecoin inspiration Kabosu dies, leaving legacy of $22.86 billion market cap meme coin behind
Kabosu, the popular Shiba Inu dog that inspired the logo of the largest meme coin by market capitalization, Dogecoin (DOGE), died early on Friday after losing her fight to leukemia and liver disease.
Week ahead – US PCE inflation and Eurozone CPI data enter the spotlight
Dollar traders lock gaze on core PCE index. Eurozone CPIs in focus as June cut looms. Tokyo CPIs may complicate BoJ’s policy plans. Aussie awaits Australian CPIs and Chinese PMIs.