Gold struggles to capitalize on weekly gains amid risk-on, bullish bias remains
- Gold price consolidates near the weekly top amid a modest USD uptick and the risk-on mood.
- The fundamental backdrop favours bullish traders and supports prospects for additional gains.
- The US Consumer Confidence Index is eyed for some impetus ahead of the US PCE Price Index.
Gold price (XAU/USD) struggles for a firm intraday direction on Wednesday and oscillates in a narrow trading band near the weekly top heading into the European session. The near-term bias, meanwhile, seems tilted in favour of bullish traders and supports prospects for an extennsion of last week’s solid bounce from the vicinity of the 50-day Simple Moving Average (SMA). The Federal Reserve’s (Fed) took a dovish turn last week and indicated that the inflation fight won’t require another rate hike. This, in turn, keeps the US Treasury bond yields depressed near a multi-month low and continues to act as a tailwind for the non-yielding yellow metal.
That said, a slew of Fed officials recently attempted to push back against expectations for early interest rate cuts. Apart from this, a modest US Dollar (USD) uptick and a bullish sentiment across the global equity markets, caps the upside for the safe-haven Gold price. Furthermore, traders opt to wait for the release of the US Core Personal Consumption Expenditure (PCE) Price Index on Friday before placing fresh directional bets around the XAU/USD. In the meantime, traders on Wednesday will take cues from the Conference Board’s US Consumer Confidence Index, which, along with Chicago Fed President Austan Goolsbee’s appearance, will drive the USD demand.
Daily Digest Market Movers: Gold price consolidates its recent gains to the weekly top
- Growing acceptance that the Federal Reserve (Fed) will pivot away from its hawkish stance early next year continues to act as a tailwind for the Gold price.
- Chicago Fed President Austan Goolsbee said the central bank is not pre-committing to cutting interest rates soon and should not be bullied by what the market wants.
- Cleveland Fed President Loretta Mester noted on Monday that financial markets had got a little bit ahead of the central bank on when to expect interest rate cuts next year.
- The markets, however, have priced in a more than 60% chance that the Fed will cut rates as soon as March 2024 and a total of 140 basis points of rate reductions in 2024.
- The yield on the benchmark 10-year US government bond languishes below the 4% mark, with the US Dollar hovering just above a multi-month low touched last week.
- The global risk-on rally remains uninterrupted amid expectations of lower interest rates in the US, more stimulus from China and dovish Bank of Japan, capping the safe-haven metal.
- Traders now look to the US Consumer Confidence Index for some impetus later this Wednesday, though the focus remains on the release of the US PCE Price Index on Friday.
Technical Analysis: Gold price seems poised to appreciate further, move beyond $2,048 awaited
From a technical perspective, some follow-through buying beyond the $2,047-2,048 region will be seen as a fresh trigger for bulls and set the stage for an extension of the post-FOMC rally from the 50-day Simple Moving Average (SMA). The Gold price might then accelerate the positive move towards the $2,072-2,073 intermediate resistance before aiming to reclaim the $2,100 round figure.
On the flip side, the $2,018-2,017 area now seems to have emerged as an immediate strong support, below which the Gold price could slide to the $2,000 psychological mark. A convincing break below the latter might prompt some technical selling and expose the 50-day SMA, currently pegged near the $1,989-1,988 zone. The subsequent downfall has the potential to drag the XAU/USD towards last week’s swing low, around the $1,973 region, en route to the 200-day SMA, currently near the $1,957 zone.
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 Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.10% | 0.09% | 0.09% | -0.11% | -0.14% | -0.10% | 0.09% | |
| EUR | -0.10% | 0.00% | -0.02% | -0.21% | -0.23% | -0.21% | -0.02% | |
| GBP | -0.10% | 0.01% | -0.01% | -0.20% | -0.23% | -0.18% | -0.01% | |
| CAD | -0.08% | 0.02% | 0.02% | -0.20% | -0.22% | -0.18% | -0.01% | |
| AUD | 0.12% | 0.21% | 0.20% | 0.20% | -0.02% | 0.01% | 0.20% | |
| JPY | 0.14% | 0.25% | 0.22% | 0.20% | 0.03% | 0.05% | 0.21% | |
| NZD | 0.08% | 0.19% | 0.17% | 0.18% | -0.02% | -0.03% | 0.17% | |
| CHF | -0.05% | 0.02% | 0.02% | -0.01% | -0.20% | -0.22% | -0.18% |
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.