- Gold price regains positive traction in reaction to Iran’s attack on Israel over the weekend.
- The upside remains capped amid hawkish Federal Reserve expectations and a bullish USD.
- The US Retail Sales and Empire State Manufacturing Index are eyed for short-term impetus.
Gold price (XAU/USD) attracts some dip-buying on the first day of a new week and stalls its retracement slide from a fresh all-time peak, around the $2,431-2,432 area touched on Friday. Iran’s attack on Israel over the weekend fueled concerns about a further escalation of conflicts in the Middle East, which, in turn, benefits the traditional safe-haven precious metal. Apart from this, subdued US Dollar (USD) price action is seen as another factor lending some support to the commodity.
The downside for the USD, however, remains cushioned in the wake of expectations that the Federal Reserve (Fed) may delay cutting interest rates due to sticky inflation in the US. The hawkish outlook keeps the US Treasury bond yields elevated, which should continue to act as a tailwind for the dollar and cap any further gains for the non-yielding Gold price. Traders are now focusing on US macro data and Fedspeak for short-term market direction.
Daily Digest Market Movers: Gold price draws support from geopolitical risks; hawkish Fed expectations cap gains
- Iran’s unprecedented direct attack on Israeli territory raised the threat of a wider regional conflict in the Middle East, aiding the safe-haven Gold price to regain positive traction on Monday.
- Israeli officials seek retaliation, while the US clarified its stance on not participating in any offensive action against Iran, limiting immediate market reactions and capping further XAU/USD gains.
- Investors have pushed back their expected timeline for the first Fed interest rate cut to September from June post hotter-than-expected US consumer inflation figures last week.
- Traders are now factoring in the likelihood of fewer rate cuts in 2024 than the Fed’s projection of three, strengthening the USD and keeping it near its highest level since early November.
- The Fed’s hawkish stance, coupled with a bullish USD, may impede aggressive bullish bets on Gold ahead of key US data releases – Retail Sales and the Empire State Manufacturing Index.
Technical Analysis: Gold price could extend the corrective slide from an all-time peak once $2,334-2,332 horizontal support is broken
From a technical viewpoint, the Relative Strength Index (RSI) on the daily chart, despite easing from overbought levels, still indicates potential resistance near the $2,400 mark post a move beyond the Asian session peak around $2,371-2,372. A breach of the $2,334-2,332 support zone could pave the way for a further downside towards the $2,300 level.
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. 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.
- Gold price regains positive traction in reaction to Iran’s attack on Israel over the weekend.
- The upside remains capped amid hawkish Federal Reserve expectations and a bullish USD.
- The US Retail Sales and Empire State Manufacturing Index are eyed for short-term impetus.
Gold price (XAU/USD) attracts some dip-buying on the first day of a new week and stalls its retracement slide from a fresh all-time peak, around the $2,431-2,432 area touched on Friday. Iran’s attack on Israel over the weekend fueled concerns about a further escalation of conflicts in the Middle East, which, in turn, benefits the traditional safe-haven precious metal. Apart from this, subdued US Dollar (USD) price action is seen as another factor lending some support to the commodity.
The downside for the USD, however, remains cushioned in the wake of expectations that the Federal Reserve (Fed) may delay cutting interest rates due to sticky inflation in the US. The hawkish outlook keeps the US Treasury bond yields elevated, which should continue to act as a tailwind for the dollar and cap any further gains for the non-yielding Gold price. Traders are now focusing on US macro data and Fedspeak for short-term market direction.
Daily Digest Market Movers: Gold price draws support from geopolitical risks; hawkish Fed expectations cap gains
- Iran’s unprecedented direct attack on Israeli territory raised the threat of a wider regional conflict in the Middle East, aiding the safe-haven Gold price to regain positive traction on Monday.
- Israeli officials seek retaliation, while the US clarified its stance on not participating in any offensive action against Iran, limiting immediate market reactions and capping further XAU/USD gains.
- Investors have pushed back their expected timeline for the first Fed interest rate cut to September from June post hotter-than-expected US consumer inflation figures last week.
- Traders are now factoring in the likelihood of fewer rate cuts in 2024 than the Fed’s projection of three, strengthening the USD and keeping it near its highest level since early November.
- The Fed’s hawkish stance, coupled with a bullish USD, may impede aggressive bullish bets on Gold ahead of key US data releases – Retail Sales and the Empire State Manufacturing Index.
Technical Analysis: Gold price could extend the corrective slide from an all-time peak once $2,334-2,332 horizontal support is broken
From a technical viewpoint, the Relative Strength Index (RSI) on the daily chart, despite easing from overbought levels, still indicates potential resistance near the $2,400 mark post a move beyond the Asian session peak around $2,371-2,372. A breach of the $2,334-2,332 support zone could pave the way for a further downside towards the $2,300 level.
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. 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.
