- Gold price is ranging near $2,160 early Tuesday, awaiting key central banks’ decisions.
- US Dollar stands tall amid pre-BoJ and RBA verdict caution, despite weak US Treasury yields.
- Gold price is teasing a Bull Flag on the daily chart, as RSI turns bullish again.
Gold price is holding the previous rebounding in Asian trading on Tuesday, as buyers take a breather ahead of the upcoming key central banks’ policy decisions. The US Dollar (USD) is stretching higher amid a risk-averse market environment, shrugging off some weakness in the US Treasury bond yields.
Gold price looks to BoJ and RBA ahead of the Fed verdict
Gold price is looking to extend the week start’s upswing but a renewed US Dollar demand seems to be keeping the upside in check. Investors are flocking to safety in the US Dollar ahead of the key Bank of Japan (BoJ) and Reserve Bank of Australia (RBA) policy announcement.
The BoJ interest rate decision is likely to spike up the market volatility, as the central bank is widely expected to do away with its negative interest rate policy (NIRP) for the first time since 2016. Also, the central bank’s policy outlook will hold the key for the next direction in the USD/JPY pair.
In case, the BoJ announces an exit from its negative interest rate policy (NIRP), a USD/JPY collapse is likely to ensue, dragging the Greenback lower alongside. Gold price could subsequently benefit from the US Dollar decline. On a steady BoJ policy outcome, Gold price could come under fresh selling pressure due to the USD/JPY ‘rub-off effect’ on the US Dollar.
Meanwhile, the RBA is likely to maintain the interest rate at 4.35% for the third straight meeting on Tuesday, unlikely to have a big market impact, similar to that of the BoJ policy announcements.
However, any reaction to the BoJ and RBA policy announcements could prove temporary, as Gold traders will reposition themselves ahead of Wednesday’s critical US Federal Reserve (Fed) policy decision and the so-called Dot Plot Chart.
Gold price technical analysis: Daily chart
The short-term technical outlook for Gold price remains more or less the same, with a Bull Flag confirmation awaited on daily candlestick closing above the falling trendline resistance at $2,164.
Acceptance above the latter will trigger a fresh upswing toward the $2,190 level, above which the record high at $2,195 will be retested. The next relevant bullish targets are seen at the $2,200 threshold and the $2,250 psychological level.
The 14-day Relative Strength Index (RSI) is sitting just beneath the overbought region, near 68.00, suggesting that a fresh Gold price upswing could be in the offing.
If Gold sellers fight back control, the immediate support is seen at the previous day’s low of $2,146, below which the falling trendline support at $2,130 will come to buyers’ rescue.
A sustained move below that level will put the March 6 low of $2,125 to the test. Further down, the key round level of $2,110 will challenge bullish commitments.
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.
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.