- Gold price struggles to lure buyers amid hawkish Fed expectations and the upbeat market mood.
- The Fed rate cut uncertainty keeps the USD bulls on the defensive and lends support to the metal.
- Traders keenly await the US consumer inflation figures on Tuesday before placing directional bets.
Gold price (XAU/USD) struggles to gain any meaningful traction through the early European session Monday, albeit manages to hold above last week’s swing low. Investors have been scaling back their expectations for early and steep interest rate cuts by the Federal Reserve (Fed) amid a still resilient US economy. This remains supportive of elevated US Treasury bond yields, which, along with the underlying bullish tone around the equity markets, continues to act as a headwind for the safe-haven precious metal.
That said, the uncertainty over the Fed’s rate-cut path fails to assist the US Dollar (USD) in attracting any meaningful buying and helps limit the downside for the Gold price. Traders also seem reluctant to place aggressive bets and prefer to wait for the US consumer inflation figures, due for release on Tuesday. This, in turn, makes it prudent to wait for a sustained breakout through a broader trading range held since the beginning of this year before traders start positioning for the next leg of a directional move for the XAU/USD.
Daily Digest Market Movers: Gold price traders await clarity about the Fed’s rate cut path before placing directional bets
- Growing acceptance that the Federal Reserve will keep interest rates higher for longer in the wake of a still resilient US economy acts as a headwind for the non-yielding Gold price.
- Moreover, the recent hawkish remarks by a slew of influential FOMC members forced investors to scale back their expectations for early and steep interest rate cuts this year.
- Dallas Fed Bank President Lorie Logan said on Friday that there is no urgency to cut rates and that she wants further evidence on inflation to confirm the progress is durable.
- Atlanta Fed President Raphael Bostic noted that inflation has been too high for too long, and there is still a way to go and that the US is on a path to pre-pandemic economic activity.
- The annual revisions published by the Labor Department showed on Friday that US consumer prices increased slightly more than previously reported in October and November.
- The US Dollar, however, struggles to gain any meaningful traction in the wake of the uncertainty about the likely timing and pace of interest rate cuts by the Fed this year.
- Traders also prefer to wait on the sidelines and look to the latest US consumer inflation figures on Tuesday for cues about the Fed’s rate-cut path before placing directional bets.
- Relatively thin trading volumes on the back of holidays in Japan and China further contribute to the subdued range-bound price action on the first day of a new week.
- The Israel military said on Monday that it had concluded a series of strikes in southern Gaza, easing fears about broadening the Israel-Palestinian conflict across the Middle East.
Technical Analysis: Gold price remains confined in a familiar trading range, going nowhere in a hurry
From a technical perspective, last week’s swing low, around the $2,015 area, is likely to protect the immediate downside ahead of the $2,000 psychological mark. Given that oscillators on the daily chart have again started gaining negative traction, a convincing break below the latter will be seen as a fresh trigger for bearish traders and pave the way for deeper losses. The Gold price might then accelerate the slide towards the 100-day Simple Moving Average (SMA), currently around the $1,988 zone before dropping to the very important 200-day SMA, near the $1,966-1,965 region.
On the flip side, the 50-day SMA, around the $2,033 area, could act as an immediate hurdle ahead of last week’s swing high, near the $2,044-2,045 area. This is followed by the $2,065 region, or the monthly peak, which if cleared decisively will negate the near-term negative outlook. The Gold price might then accelerate the positive move towards retesting the YTD peak, near the $2,078-2,079 touched in January. The subsequent move up has the potential to lift the XAU/USD to the $2,100 mark en route to the next relevant hurdle near the $2,120 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 New Zealand Dollar.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | 0.05% | 0.05% | 0.02% | 0.05% | 0.05% | 0.29% | 0.03% | |
EUR | -0.05% | 0.01% | -0.02% | 0.04% | 0.00% | 0.24% | -0.01% | |
GBP | -0.05% | 0.00% | -0.02% | 0.01% | 0.00% | 0.24% | -0.01% | |
CAD | -0.02% | 0.02% | 0.03% | 0.03% | 0.03% | 0.26% | 0.01% | |
AUD | -0.06% | -0.01% | -0.01% | -0.04% | -0.01% | 0.23% | -0.03% | |
JPY | -0.05% | -0.01% | 0.04% | -0.03% | 0.01% | 0.23% | -0.02% | |
NZD | -0.29% | -0.24% | -0.23% | -0.26% | -0.23% | -0.23% | -0.25% | |
CHF | -0.05% | -0.01% | 0.01% | -0.03% | 0.00% | 0.00% | 0.24% |
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).
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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