Gold prices continue their downward trend for the second consecutive day, reaching a one-week low around the $2,025 mark during the early European session. The robust US jobs report released on Friday has led investors to revise their expectations for the Federal Reserve’s rate cuts, resulting in higher US Treasury bond yields and putting pressure on the non-yielding gold.
Despite the US Dollar (USD) facing resistance ahead of the 100-day Simple Moving Average (SMA), limiting its gains, gold remains under selling pressure. Geopolitical concerns, particularly in the Middle East, and economic troubles in China offer some support to the safe-haven gold.
Traders are now turning their attention to the upcoming US ISM Services PMI and speeches by influential FOMC members for potential short-term opportunities.
Daily Digest Market Movers: Despite subdued USD demand and geopolitical risks, gold prices remain depressed.
- The strong US employment data released on Friday has prompted a scaling back of expectations for Federal Reserve rate cuts, negatively impacting gold prices.
- Key details from the Non-Farm Payrolls (NFP) report revealed a significant addition of 353K new jobs in January, almost double the anticipated 180K, with a positive revision for the previous month to 333K from 216K.
- The Unemployment Rate held steady at 3.7%, and wage inflation, measured by Average Hourly Earnings, rose to 4.5% YoY, exceeding the expected 4.1%.
- The probability of a March rate cut dropped to approximately 15%, down from over 65% last month. The likelihood of a 150-basis-point rate cut in 2024 has also fallen to 25% from being nearly certain.
- The yield on the 10-year US government bond rose above 4.0% post-NFP, pushing the US Dollar to a new high since December.
- Concerns about a slowdown in China were fueled by a private survey indicating slower-than-expected growth in the services sector for January.
- Geopolitical tensions, including ongoing conflicts in the Middle East and a potential Hamas rejection of the Gaza ceasefire deal, contribute to the safe-haven appeal of gold.
- The US Central Command reported a self-defense strike against a Houthi land attack cruise missile and intercepted four anti-ship cruise missiles in the Red Sea.
- Traders are now anticipating the release of the US ISM Services PMI for potential short-term opportunities during the early North American session on Monday.
Technical Analysis: Gold prices are vulnerable to testing support levels around $2,010-$2,009 and the psychological mark of $2,000.
From a technical standpoint, a breach below the 50-day Simple Moving Average and subsequent decline below Friday’s low, approximately the $2,028-$2,027 range, could lead gold prices to the $2,012-$2,010 area. The next significant level is the psychological support at $2,000, and a decisive break below this level may favor bearish traders, exposing the 100-day SMA support near $1,983-$1,982 and potentially testing the crucial 200-day SMA around $1,965.
Conversely, a momentum breakthrough above the Asian session peak around $2,042 might encounter resistance near the $2,054-$2,055 zone and the $2,065 area or last week’s high. Positive momentum has the potential to drive gold prices toward the $2,078-$2,079 region, reaching the year-to-date peak set in January. Subsequent upward movement could see XAU/USD reclaim the $2,100 mark and advance further to the $2,020 resistance.
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 | 0.01% | 0.12% | 0.06% | -0.01% | -0.06% | -0.13% | 0.07% | |
EUR | -0.01% | 0.11% | 0.04% | -0.02% | -0.07% | -0.15% | 0.06% | |
GBP | -0.10% | -0.10% | -0.06% | -0.15% | -0.19% | -0.22% | -0.04% | |
CAD | -0.05% | -0.03% | 0.06% | -0.09% | -0.12% | -0.19% | 0.01% | |
AUD | 0.01% | 0.05% | 0.15% | 0.09% | -0.04% | -0.10% | 0.10% | |
JPY | 0.06% | 0.08% | 0.17% | 0.13% | 0.05% | -0.07% | 0.14% | |
NZD | 0.14% | 0.16% | 0.26% | 0.21% | 0.13% | 0.08% | 0.21% | |
CHF | -0.06% | -0.05% | 0.04% | -0.01% | -0.07% | -0.13% | -0.19% |
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).
FED FAQS
What does the Federal Reserve do, how does it impact the US Dollar?
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
How often does the Fed hold monetary policy meetings?
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
What is Quantitative Easing (QE) and how does it impact USD?
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
What is Quantitative Tightening (QT) and how does it impact the US Dollar?
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.