Gold bulls turn cautious near 50-day SMA, one-week top ahead of FOMC minutes – Crypto News – Crypto News
Connect with us
XAU/USD remains unable to consolidate above $1,820 XAU/USD remains unable to consolidate above $1,820

others

Gold bulls turn cautious near 50-day SMA, one-week top ahead of FOMC minutes – Crypto News

Published

1 year ago

on

Share:

  • Gold price attracts some buyers for the fifth successive day amid modest USD weakness.
  • Geopolitical risks benefit the safe-haven XAU/USD and remain supportive of the uptick.
  • Elevated US bond yields cap any further gains ahead of the key FOMC meeting minutes.

Gold price (XAU/USD) touches over a one-week high on Wednesday, albeit struggles to build on the momentum and remains capped near the 50-day Simple Moving Average (SMA) through the early European session. Bulls turn cautious and prefer to wait for more cues about the Federal Reserve’s (Fed) rate-cut path before placing fresh bets. Moreover, the markets have fully priced out the possibility of early rate cuts in the wake of a still resilient US economy, which remains supportive of elevated US Treasury bond yields and contributes to capping the non-yielding yellow metal. 

The downside for the Gold price, however, seems cushioned in the wake of the prevalent US Dollar (USD) selling bias, which, so far, has been struggling to attract buyers despite hawkish Fed expectations. This, along with a softer risk tone, lends some support to the safe-haven precious metal. Hence, any meaningful corrective slide is more likely to get bought into and remain limited amid the risk of a further escalation of geopolitical tensions in the Middle East. 

Daily Digest Market Movers: Gold price bulls refrain from placing fresh bets amid elevated US bond yields

  • A combination of supporting factors assists the Gold price to steadily climb back closer to a one-week peak and the 50-day SMA barrier during the Asian session on Wednesday.
  • The markets are pricing in four 25 basis points interest rate cuts by the Federal Reserve in 2024, starting from June, which weighs on the US Dollar and lends support to the metal.
  • Investors remain concerned about the risk of a further escalation of tensions in the Middle East in the wake of a string of attacks on shipping in the Red Sea by Houthi rebels in Yemen.
  • US officials said last week that Russia is developing a space-based anti-satellite nuclear weapon, though President Vladimir Putin said that Moscow is against the deployment of nuclear weapons in space.
  • A White House official said that the US will announce a major sanctions package against Russia on Friday to hold President Vladimir Putin accountable for the two-year war on Ukraine.
  • The People’s Bank of China lowered the five-year loan prime rate by 25 bps – the biggest cut since it was introduced in 2019 – to support real estate developers and bolster economic growth.
  • The yield on the benchmark 10-year US government bond holds comfortably above the 4.0% mark as traders keenly await the FOMC meeting minutes for fresh cues about the rate-cut path.
  • Hawkish signals from policymakers will likely renew jitters that the Fed will keep rates higher for longer, which, in turn, should boost the buck and may not be good news for the XAU/USD.

Technical Analysis: Gold price continues with its struggle to break through the 50-day SMA pivotal resistance

From a technical perspective, sustained strength and acceptance above the 50-day SMA will set the stage for an extension of the recent recovery from the $1,984 region, or a two-month low touched last week. Given that oscillators on the daily chart have been gaining positive traction, the Gold price might then accelerate the positive move towards an intermediate hurdle near the $2,044-2,045 region en route to the $2,065 supply zone.

On the flip side, the $2,016-2,015 area could protect the immediate downside ahead of the 100-day SMA, currently pegged near just below the $2,000 psychological mark. Some follow-through selling, leading to a subsequent break through the $1,984 area, or the monthly low, will be seen as a fresh trigger for bearish traders. The subsequent downfall has the potential to drag the Gold price to the very important 200-day SMA support near the $1,965 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 Japanese Yen.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.06% -0.07% -0.11% -0.26% -0.05% -0.35% -0.15%
EUR 0.07%   -0.01% -0.04% -0.19% 0.00% -0.28% -0.08%
GBP 0.08% 0.01%   -0.02% -0.19% 0.04% -0.27% -0.06%
CAD 0.10% 0.03% 0.03%   -0.17% 0.04% -0.25% -0.04%
AUD 0.27% 0.19% 0.18% 0.16%   0.21% -0.09% 0.12%
JPY 0.05% -0.01% -0.04% -0.04% -0.20%   -0.31% -0.10%
NZD 0.35% 0.28% 0.28% 0.24% 0.08% 0.30%   0.21%
CHF 0.14% 0.08% 0.06% 0.04% -0.12% 0.10% -0.21%  

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).

US Interest rates FAQs

Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.

Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.

The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.

Related Topics:
Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Trending