Gold price draws support from geopolitical risk, retreating US bond yields and softer USD – Crypto News – Crypto News
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XAU/USD to added credence to bearish potential on a drop under $1,750 XAU/USD to added credence to bearish potential on a drop under $1,750

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Gold price draws support from geopolitical risk, retreating US bond yields and softer USD – Crypto News

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  • Gold price advances to over a one-week high during the Asian session on Tuesday.
  • Geopolitical tensions in the Middle East and retreating US bond yields lend support.
  • A positive risk tone caps gains as traders look to the FOMC minutes and the US CPI.

Gold price (XAU/USD) registered strong gains of over 1% on Monday and settled above the mid-$1,800 in the wake of concerns about the geopolitical tensions in the Middle East. The safe-haven precious metal, which tends to benefit from political and economic turmoil, draws additional support from the ongoing retracement slide in the US Treasury bond yields, led by reduced bets for further rate hikes by the Federal Reserve (Fed). This, along with subdued US Dollar (USD) price action, pushes the commodity higher for the third successive day on Tuesday.

Gold price climbed to over a one-week high during the Asian session and has now recovered over $50 from a seven-month low touched last Friday. That said, a generally positive tone around the equity markets is holding back bullish traders from placing fresh bets around the XAU/USD and capping gains. Investors also seem reluctant and prefer to wait on the sidelines ahead of this week’s key releases from the United States (US) – the FOMC monetary policy meeting minutes on Wednesday, followed by the latest consumer inflation figures on Thursday.

Daily Digest Market Movers: Gold price benefits from geopolitical risks, reduced Fed rate hike bets

  • Military conflict between Israeli forces and Palestinian Islamist group Hamas continues to drive some haven flows, lifting the Gold price to over a one-week high on Tuesday.
  • Fed officials struck a cautious tone about the need for further rate hikes and said that the recent rise in the long-term US Treasury bond yields would help the Fed in its battle against inflation.
  • Fed Vice Chair Philip Jefferson also sounded less hawkish and suggested the central bank proceed carefully with any further increases in the benchmark federal funds rate.
  • Dallas Fed President Lorie Logan noted that the progress on inflation is encouraging, while output and spending have been surprisingly strong, forcing investors to trim their bets for further rate increases.
  • The repricing of the Fed’s rate-hike path led to a further decline in the US Treasury bond yields, which kept the US Dollar bulls on the defensive and further benefitted the XAU/USD.
  • The markets, however, are still pricing in the possibility of at least one more Fed rate hike by the end of this year, which should limit the downside for the US bond yields and the USD.
  • Investors now look to the FOMC meeting minutes and the US consumer inflation figures, due on Wednesday and Thursday, respectively, for cues about the Fed’s next policy move.

Technical Analysis: Gold price could extend the vulnerable recovery move

From a technical perspective, some follow-through buying beyond the $1,865 level should pave the way for additional gains, towards the next relevant hurdle near the $1,885 area. This is closely followed by the $1,900 round figure, which nears the 50-day Simple Moving Average (SMA) and should now act as a key pivotal point. A sustained strength beyond will suggest that the Gold price has formed a near-term bottom and pave the way for additional gains towards testing the 200-day SMA, currently pegged near the $1,928-1,930 region.

On the flip side, any meaningful decline might now find some support near the $1,855-$1,850 zone ahead of the $1,835-1,834 region. A convincing break below the latter will suggest that the corrective bounce has run its course and drag the Gold price to the $1,820 support en route to the multi-month low, around the $1,810 zone. Furthermore, the occurrence of a death cross on the daily chart, wherein the 50-day SMA is holding well below the 200-day SMA, warrants caution for bullish traders and before positioning for further gains.

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 Canadian Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.05% 0.05% -0.05% 0.00% 0.16% 0.03% -0.02%
EUR -0.04%   0.00% -0.10% -0.06% 0.13% -0.04% -0.06%
GBP -0.06% 0.00%   -0.10% -0.05% 0.11% -0.03% -0.07%
CAD 0.04% 0.10% 0.10%   0.04% 0.23% 0.06% 0.04%
AUD 0.01% 0.03% 0.04% -0.06%   0.18% 0.01% -0.03%
JPY -0.17% -0.13% -0.13% -0.22% -0.18%   -0.19% -0.19%
NZD 0.00% 0.02% 0.02% -0.08% -0.02% 0.17%   -0.04%
CHF 0.02% 0.06% 0.07% -0.04% 0.02% 0.19% 0.02%  

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).

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.

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