XAU/USD buyers eye $1,830 hurdle ahead of US ISM Services PMI

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Gold sticks to modest intraday gains, US macro data and FOMC minutes awaited – Crypto News

Published

2 years ago

January 3, 2024

Dripp

Gold price attracts dip-buying amid Fed rate cut bets, geopolitical risks and China’s economic woes.
The USD preserves the overnight strong gains amid elevated US bond yields and acts as a headwind.
Traders might also refrain from placing aggressive bets ahead of US data and FOMC meeting minutes.

Gold price (XAU/USD) retreated over $20 intraday and finally settled in the red for the third successive day on Tuesday, albeit lacking follow-through selling. Expectations that the Federal Reserve (Fed) will ease its monetary policy this year keep a lid on the recent US Dollar (USD) recovery from a multi-month low touched last week. This, along with concerns about fragile economic recovery in China and geopolitical risks, assisted the safe-haven commodity in attracting some buyers on Wednesday.

That said, doubts over early interest rate cuts by the Fed, which led to the overnight sharp move higher in the US Treasury bond yields, act as a headwind for the non-yielding Gold price. Hence, the FOMC meeting minutes will be scrutinized for cues about the Fed’s future policy moves, which, in turn, will drive the USD and the non-yielding yellow metal. In the meantime, the US ISM Manufacturing PMI and JOLTS Job Openings data will be looked upon for short-term trading opportunities.

Daily Digest Market Movers: Gold price trades with modest gains amid softer US Dollar

A combination of supporting factors assists the Gold price to regain positive traction on Wednesday and snap a three-day losing streak.
Bets that the Federal Reserve will cut interest rates in March turn out to be a key factor lending support to the non-yielding yellow metal.
The possibility of a further escalation of conflict in the Red Sea, along with China’s economic woes, also acts as a tailwind for the safe-haven metal.
The official Chinese PMI released over the weekend indicated a further deterioration in manufacturing activity and little signs of recovery at the end of 2023.
A private survey showed on Tuesday that China’s factory activity expanded at a quicker pace in December but business confidence for 2024 remained subdued.
The US Dollar consolidates the overnight strong gains to a more than one-week top, helped by a sharp rise in the US bond yields, and caps the commodity.
Traders might also prefer to wait on the sidelines ahead of the US ISM Manufacturing PMI, JOLTS Job Openings data and the crucial FOMC meeting minutes.

Technical Analysis: Gold price needs to break through $2,078 barrier for bulls to seize control

From a technical perspective, the overnight failure near the all-time high closing, around the $2,077-2,078 region, and the subsequent slide warrants caution for bullish traders. The said hurdle should now act as a key pivotal point, which if cleared decisively will set the stage for a move towards reclaiming the $2,100 round-figure mark. Meanwhile, oscillators on the daily chart are holding comfortably in the positive territory and support prospects for the emergence of some dip-buying at lower levels.

The overnight low, around the $2,055 area, now seems to protect the immediate downside ahead of the $2,040 horizontal zone. A convincing break below the latter might turn the Gold price vulnerable to accelerate the downfall further towards the $2,020 intermediate support en route to the 50-day Simple Moving Average (SMA), currently near the $2,008-2,007 region, and the $2,000 psychological mark. Some follow-through selling will expose the $1,960 confluence, comprising the 100- and the 200-day SMAs.

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 .

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		-0.16%	-0.11%	0.04%	0.11%	-0.15%	-0.18%	-0.07%
EUR	0.17%		0.03%	0.19%	0.25%	0.01%	-0.03%	0.08%
GBP	0.11%	-0.04%		0.16%	0.22%	-0.05%	-0.07%	0.04%
CAD	-0.03%	-0.19%	-0.15%		0.06%	-0.18%	-0.21%	-0.11%
AUD	-0.11%	-0.24%	-0.21%	-0.06%		-0.25%	-0.28%	-0.18%
JPY	0.15%	-0.03%	0.02%	0.19%	0.23%		-0.07%	0.06%
NZD	0.18%	0.03%	0.07%	0.24%	0.30%	0.03%		0.11%
CHF	0.09%	-0.07%	-0.03%	0.11%	0.19%	-0.07%	-0.10%

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.