Gold attracts some sellers ahead of US GDP data
- Gold price loses traction in Thursday’s Asian session.
- The downtick of the yellow metal is backed by the stronger USD and higher US yields.
- Gold traders await the US Q1 GDP data for fresh impetus and monitor the Middle East geopolitical risks.
Gold price (XAU/USD) trades in negative territory on Thursday, supported by the firmer US Dollar (USD) and higher US yields. The diminishing expectation of the Federal Reserve’s (Fed) rate cut in September exerts some selling pressure on the precious metal as it will increase gold’s opportunity costs.
Investors will monitor the second estimate of the US Gross Domestic Product (GDP) for Q1 2024 on Thursday. In the event that the US economy shows a stronger-than-expected reading, this might further lift the USD and weigh on the USD-denominated gold price. Nonetheless, the ongoing geopolitical tensions in the Middle East might boost traditional safe-haven assets like gold. Also, the rising demand from the central bank might cap the downside for yellow metal in the near term.
Daily Digest Market Movers: Gold price remains weak amid stronger US data
- The Israeli military said on Wednesday that it established “operational control” over the Philadelphi Corridor, a 14-kilometer (8.7 miles) strip of land along the border between Gaza and Egypt, per CNN.
- Global physically-backed gold Exchange-Traded Funds (ETFs) witnessed a net outflow of 11.3 metric tonnes last week, according to the World Gold Council.
- Fed Atlanta President Bostic said on Thursday that the breadth of price gains is still significant, but less inflation breadth would add to confidence for a rate cut.
- Economic activity continued to expand in the US and prices increased modestly from early April to mid-May. Overall outlooks were more pessimistic amid reports of rising uncertainty and greater downside risks, according to the Fed’s Beige Book released Wednesday.
- Markets are pricing in a 50% chance that the Fed will hold interest rates in September, according to the CME FedWatch Tool.
- The US Gross Domestic Product (GDP) number is estimated to expand at a 1.3% annual pace in the first quarter of 2024.
Technical analysis: Gold price keeps the bullish vibe in the long term
The gold price trades with negative bias on the day. According to the 1-hour chart, the precious metal stays bullish above the key 100-day Exponential Moving Average (EMA). However, the further consolidation or directionlessness of the yellow metal cannot be ruled out as the 14-day Relative Strength Index (RSI) hovers around the 50-midline, indicating a neutral level between bullish and bearish positions.
Extended gains above the upper boundary of the Bollinger Band at $2,425 might visit the all-time high of $2,450. An upside breakout above the mentioned level will pave the way to the $2,500 psychological mark.
On the downside, the first downside target of XAU/USD is located at a low of May 24 at $2,325. The potential support level will emerge at the $2,300 figure. A breach of this level will see a drop to the lower limit of the Bollinger Band at $2,284, followed by the 100-day EMA of $2,227.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the .
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.46% | 0.32% | 0.41% | 0.24% | 0.35% | 0.22% | -0.07% | |
| EUR | -0.46% | -0.14% | -0.06% | -0.23% | -0.11% | -0.24% | -0.53% | |
| GBP | -0.32% | 0.14% | 0.08% | -0.08% | 0.03% | -0.09% | -0.40% | |
| CAD | -0.41% | 0.06% | -0.08% | -0.17% | -0.05% | -0.18% | -0.49% | |
| AUD | -0.24% | 0.23% | 0.13% | 0.17% | 0.17% | 0.00% | -0.31% | |
| JPY | -0.35% | 0.11% | -0.02% | 0.04% | -0.14% | -0.14% | -0.43% | |
| NZD | -0.22% | 0.24% | 0.09% | 0.18% | 0.00% | 0.12% | -0.30% | |
| CHF | 0.07% | 0.53% | 0.39% | 0.48% | 0.30% | 0.42% | 0.29% |
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).
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.