- Gold price remains under some selling pressure for the second successive day on Monday.
- Reduced bets for a March Fed rate cut move and a modest USD uptick weigh on the metal.
- Geopolitical risks could help limit further losses ahead of this week’s key data/event risks.
Gold price (XAU/USD) fell over 1.5% intraday and touched a two-week trough on Friday following the release of stronger-than-expected employment details from the United States (US). The closely-watched US jobs report showed strength across the board and pointed to a resilient economy, forcing investors to trim their bets for a 25 basis points (bps) interest rate cut by the Federal Reserve (Fed) in March 2024. This pushed the US Treasury bond yields and the US Dollar (USD) higher, which, in turn, weighed heavily on the commodity.
The selling bias around the Gold price remains unabated through the Asian session on Monday, though it lacks follow-through amid geopolitical risks. Traders also seem reluctant to place aggressive bets ahead of this week’s key data and central bank event risks. The US consumer inflation figures are due on Tuesday, which will be followed by the crucial FOMC decision on Wednesday. The Swiss National Bank (SNB), the Bank of England (BoE) and the European Central Bank (ECB) are also scheduled to announce policy updates on Thursday.
The market attention will then turn to the release of flash PMI prints from the Eurozone, the UK and the US, which will offer fresh insight into the health of the global economy and provide some meaningful impetus to the Gold price. Nevertheless, the XAU/USD, for now, seems to have found acceptance below the $2,000 psychological mark and looks to a possible Fed pivot to prevent a deeper correction.
Daily Digest Market Movers: Gold price continues to be weighed down by reduced bets for a rate cut by the Fed in March 2024
- The benchmark 10-year US Treasury yield rebounded from a three-month low after the upbeat US jobs data and lifted the US Dollar, which undermined the Gold price on Friday.
- The US NFP report showed that the economy added 199K new jobs in November, surpassing estimates for a reading of 180K and 150K rise in the previous month.
- The US Bureau of Labor Statistics (BLS) reported that the Unemployment Rate dipped to 3.7% from 3.9% in October, despite a rise in the Labor Force Participation Rate.
- The data pointed to the underlying labour market strength and made traders bet that it could take the Federal Reserve until May 2024 to deliver the first interest rate cut.
- The US troops were targeted with rockets and drones at least five more times on Friday by Iran-backed militias in Iraq and Syria over its support to Israel amid a war in Gaza.
- The US embassy in Iraq’s capital Baghdad was shelled on Friday after being attacked by 14 rockets earlier, increasing fears of a broadening conflict in the Middle East.
- Traders now look to this week’s US consumer inflation figures and the Fed’s interest rate projections for next year before placing aggressive directional bets.
- A rather busy week also features the Swiss National Bank (SNB), the Bank of England (BoE) and the European Central Bank (ECB) monetary policy meetings on Thursday.
Technical Analysis: Gold price seems vulnerable to slide further towards testing the 50-day SMA support near the $1,950 area
From a technical perspective, Friday’s breakdown below the $2,012-2,010 area, representing the 61.8% Fibonacci retracement level of the November-December rally, could be seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart have been losing positive traction, which, in turn, supports prospects for deeper losses. Hence, a subsequent slide towards testing the 50-day Simple Moving Average (SMA), currently pegged around the $1,965-1,963 zone, looks like a distinct possibility. This is followed by the very important 200-day SMA, near the $1,951-1,950 region, which if broken decisively will set the stage for an extension of the recent sharp pullback from an all-time high touched last Monday.
On the flip side, the $2,010-2,012 support breakpoint now seems to act as an immediate hurdle ahead of the $2,030 level and the $2,040 supply zone. Against the backdrop of the occurrence of a golden cross, with the 50-day rising above the 200-day SMA, some follow-through buying will shift the near-term bias in favor of bullish traders. The Gold price might then climb to the next relevant resistance near the $2,071-2,072 region before aiming to reclaim the $2,100 round figure.
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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.03% | 0.11% | 0.12% | 0.35% | 0.40% | 0.23% | 0.04% | |
| EUR | -0.02% | 0.09% | 0.11% | 0.35% | 0.39% | 0.21% | 0.01% | |
| GBP | -0.10% | -0.09% | 0.02% | 0.26% | 0.30% | 0.12% | -0.08% | |
| CAD | -0.12% | -0.11% | -0.03% | 0.23% | 0.29% | 0.10% | -0.10% | |
| AUD | -0.36% | -0.35% | -0.27% | -0.24% | 0.05% | -0.13% | -0.34% | |
| JPY | -0.41% | -0.38% | -0.39% | -0.29% | -0.06% | -0.18% | -0.37% | |
| NZD | -0.23% | -0.20% | -0.11% | -0.10% | 0.13% | 0.17% | -0.19% | |
| CHF | -0.02% | -0.01% | 0.07% | 0.10% | 0.34% | 0.39% | 0.20% |
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).
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.