- Gold price attracts buyers on Thursday and snaps a two-day losing streak from over a one-month low.
- A generally weaker risk tone offers some support to the safe-haven metal amid a modest USD downtick.
- Diminishing odds for a March Fed rate cut to act as a tailwind for the buck and cap any further gains.
Gold price (XAU/USD) gains some positive traction on Thursday and for now, seems to have snapped a two-day losing streak to the $2,000 psychological mark, or over a one-month low touched the previous day. The precious metal sticks to its modest gains through the early European session amid the flight to safety, bolstered by geopolitical tensions and worries about a weak economic outlook for China. Apart from this, a modest US Dollar (USD) downtick turns out to be another factor benefitting the commodity, though the intraday uptick lacks bullish conviction.
The upbeat US Retail Sales released on Wednesday pointed to a resilient economy and gives the Federal Reserve (Fed) more headroom to keep interest rates higher for longer. This remains supportive of elevated US Treasury bond yields, which should act as a tailwind for the USD and cap any meaningful upside for the non-yielding Gold price. Hence, it will be prudent to wait for strong follow-through buying before confirming that the XAU/USD has bottomed out in the near term and positioning for further gains. Traders now look to the US economic docket, featuring Initial Jobless Claims, the Philly Fed Manufacturing Index and housing market data, and Atlanta President Raphael Bostic’s speech for some impetus.
Daily Digest Market Movers: Gold price lacks bullish conviction amid doubts over early Fed rate cut
- A modest US Dollar downtick, along with geopolitical tensions and China’s economic woes, assists the Gold price in attracting some buyers in the vicinity of the $2,000 psychological mark on Thursday.
- Yemen-based Houthi rebels claimed their second attack this week on a US-operated vessel in the Red Sea and have threatened to expand attacks in response to the American and British strikes.
- Pakistan undertook series of military strikes against terrorist hideouts in Sistan-Baluchistan province of Iran and said that it will continue to take all necessary steps to safeguard its people.
- China’s economy grew at an annual rate of 5.2% in the final quarter of 2023, more than the official 5% target, though investors remain concerned amid mounting deflationary risks and tepid demand.
- Data released on Wednesday showed that the headline US Retail Sales increased more than anticipated, by 0.6% in December, while core sales – excluding autos – also topped market estimates.
- The data points to still-resilient consumer spending and the underlying strength that the US economy possessed, which could provide the Fed more headroom to keep rates higher for longer.
- Furthermore, Fed Governor Christopher Waller said on Tuesday that the central bank should not rush to cut interest rates until it was clear lower inflation would be sustained.
- The yield on the benchmark 10-year US government bond holds comfortably above the 4% mark, near its highest level since December 13, and should lend some support to the Greenback.
- Traders now look to Thursday’s US economic docket – featuring the release of Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and housing market data – for a fresh impetus.
Technical Analysis: Gold price remains below 50-day SMA, any further move up could get sold into
From a technical perspective, the overnight breakdown through the 50-day Simple Moving Average (SMA) pivotal support was seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart have just started gaining negative traction and are still far from being in the oversold territory. This, in turn, suggests that the path of least resistance for the Gold price is to the downside. Hence, any subsequent move up might still be seen as a selling opportunity and runs the risk of fizzling out quickly near the $2,017-2,018 region (50-day SMA). That said, a sustained strength beyond might prompt some short-covering rally and lift the XAU/USD further towards the $2,042-2,045 horizontal resistance.
On the flip side, bearish traders might now wait for some follow-through selling below the $2,000 psychological mark before placing fresh bets. The Gold price might then accelerate the downfall towards the December monthly swing low, around the $1,974-1,973 region. The latter near the 100- and 200-day SMAs confluence, around the $1,970-1,964 area, which if broken decisively should pave the way for deeper losses. The XAU/USD might then weaken further towards the $1,955 intermediate support before eventually dropping to the November swing low, around the $1,932-1,931 region.
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 New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.12% | -0.10% | -0.10% | -0.20% | -0.06% | -0.22% | -0.05% | |
| EUR | 0.12% | 0.00% | 0.02% | -0.08% | 0.06% | -0.10% | 0.07% | |
| GBP | 0.12% | 0.01% | 0.02% | -0.07% | 0.07% | -0.10% | 0.08% | |
| CAD | 0.10% | -0.02% | -0.01% | -0.09% | 0.03% | -0.12% | 0.06% | |
| AUD | 0.18% | 0.08% | 0.08% | 0.09% | 0.14% | -0.03% | 0.15% | |
| JPY | 0.06% | -0.06% | -0.06% | -0.05% | -0.14% | -0.18% | 0.02% | |
| NZD | 0.24% | 0.11% | 0.12% | 0.12% | 0.03% | 0.16% | 0.18% | |
| CHF | 0.05% | -0.07% | -0.06% | -0.06% | -0.14% | -0.02% | -0.17% |
INTEREST RATES FAQS
What are interest rates?
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.
How do interest rates impact currencies?
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.
How do interest rates influence the price of Gold?
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.
What is the Fed Funds rate?
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.
