Gold sticks to gains near one-week peak amid the post-FOMC slide in bond yields/USD – Crypto News – Crypto News
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Gold sticks to gains near one-week peak amid the post-FOMC slide in bond yields/USD – Crypto News

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  • Gold price attracts some follow-through buying for the second straight day on Thursday.
  • The US bond yields and the USD extend the post-FOMC slide, lending support to the metal.
  • The risk-on environment caps gains for the XAU/USD ahead of the central bank bonanza.

Gold price (XAU/USD) builds on the overnight solid recovery from the vicinity of the 50-day Simple Moving Average (SMA), around the $1,973 area, or over a three-week low and gains positive traction for the second successive day on Thursday. The previous metal sticks to modest intraday gains heading into the European session and seems poised to appreciate further in the wake of the Federal Reserve’s (Fed) dovish shift. 

In fact, the US central bank signalled on Wednesday that it is done raising interest rates and the so-called “dot plot” indicated three 25 basis points (bps) rate cuts in 2024. This leads to a further decline in the US Treasury bond yields and continues to undermine the US Dollar (USD), which should undermine the non-yielding Gold price. This, along with geopolitical risk and China’s economic woes, validates the positive outlook. 

Traders, however, opt to wait on the sidelines ahead of key central bank meetings later today amid the prevalent risk-on mood. The Swiss National Bank (SNB), the Bank of England (BoE) and the European Central Bank (ECB) are due to announce their policy decisions, which might infuse some volatility in the markets. Apart from this, the US monthly Retail Sales figures should provide some impetus to the Gold price. 

Daily Digest Market Movers: Gold price seems poised to build on the post-FOMC rally

  • The Federal Reserve on Wednesday decided to keep interest rates at a 22-year high for the third meeting in a row and struck a more dovish tone in the accompanying policy statement.
  • Policymakers see inflation getting closer to the 2% annual target without a recession and the fed funds rate peaking at 4.6% in 2024, down from September’s projection of 5.1%.
  • Data released on Wednesday showed that the rise in average prices that businesses pay to suppliers decelerated to 0.9% in November, down from a 1.2% annual increase in October.
  • The markets are now pricing in a nearly 60% chance that the Fed will begin to cut rates at its March meeting and the odds of a May rate cut stand at 90% versus 80% before the announcement.
  • The benchmark 10-year US government bond yield tumbles below 4%, to its lowest level since August and the yield on the rate-sensitive two-year Treasury note touches its weakest level since July.
  • The post-FOMC US Dollar selling lends additional support to the Gold price, albeit the risk-on environment keeps a lid on any further gains ahead of the central bank bonanza on Thursday.
  • The Swiss National Bank (SNB), the Bank of England (BoE) and the European Central Bank (ECB) will announce their policy decisions later today, which might infuse some volatility.
  • Traders on Thursday will further take cues from the US monthly Retail Sales data, which consensus estimates pointing to a fall for the second successive month, by 0.1% in November.

Technical Analysis: Gold price flirts with $2,040 supply zone, set-up favours bullish traders

From a technical perspective, some follow-through buying beyond the $2,040 area will be seen as a fresh trigger for bullish traders. With oscillators on the daily chart holding in the positive territory, the Gold price might then climb to the next relevant hurdle near the $2,072-2,073 region. The momentum could get extended further and allow the XAU/USD to reclaim the $2,100 round-figure mark.

On the flip side, the $2,012-2,010 horizontal zone might now protect the immediate downside ahead of the $2,000 psychological mark. A convincing break below the latter will make the Gold price vulnerable and expose the 50-day SMA support, currently pegged near the $1,973-1,972 region. This is followed by the 200-day SMA, near the $1,950 area, which if broken will shift the bias in favour of bearish traders.

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 Pound Sterling.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.25% -0.22% -0.34% -0.84% -0.97% -0.83% -0.44%
EUR 0.25%   0.03% -0.08% -0.60% -0.72% -0.59% -0.19%
GBP 0.20% -0.03%   -0.11% -0.64% -0.81% -0.64% -0.22%
CAD 0.35% 0.09% 0.12%   -0.52% -0.64% -0.52% -0.11%
AUD 0.85% 0.60% 0.62% 0.51%   -0.13% -0.01% 0.40%
JPY 0.82% 0.59% 0.63% 0.49% 0.00%   0.01% 0.39%
NZD 0.86% 0.58% 0.62% 0.50% -0.03% -0.14%   0.39%
CHF 0.40% 0.16% 0.22% 0.08% -0.44% -0.58% -0.42%  

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).

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.

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