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) witnessed a dramatic turnaround from an all-time peak touched last week and dropped to a two-week low on Friday following the release of stronger-than-expected employment details from the United States (US). The closely-watched US jobs report pointed to a still resilient US labour market and forced 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.
This, along with signs of stability in the equity markets, keeps the safe-haven Gold price depressed for the second straight day on Monday. That said, worries about a global economic downturn, particularly in China, along with geopolitical risks, lend some support to the precious metal and help limit deeper losses. 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 outcome of the crucial two-day FOMC meeting on Wednesday.
The focus, meanwhile, will remain glued to the so-called “dot plot”, which will provide cues about the Fed’s rate projections for the next year and provide some meaningful impetus to the non-yielding Gold price. 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 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 further influence the precious metal.
Daily Digest Market Movers: Gold price remains depressed amid diminishing odds for an early Fed rate cut
The benchmark src0-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 src99K new jobs in November, surpassing estimates for a reading of src80K and src50K 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 src4 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 finds acceptance below $2,000 psychological mark, could drop to 50-day SMA
From a technical perspective, Friday’s breakdown below the $2,0src2-2,0src0 area, representing the 6src.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 $src,965-src,963 zone, looks like a distinct possibility. This is followed by the very important 200-day SMA, near the $src,95src-src,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 $2,0src0-2,0src2 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 $2,07src-2,072 region before aiming to reclaim the $2,src00 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.srcsrc%
0.src2%
0.35%
0.40%
0.23%
0.04%
EUR
-0.02%
0.09%
0.srcsrc%
0.35%
0.39%
0.2src%
0.0src%
GBP
-0.src0%
-0.09%
0.02%
0.26%
0.30%
0.src2%
-0.08%
CAD
-0.src2%
-0.srcsrc%
-0.03%
0.23%
0.29%
0.src0%
-0.src0%
AUD
-0.36%
-0.35%
-0.27%
-0.24%
0.05%
-0.src3%
-0.34%
JPY
-0.4src%
-0.38%
-0.39%
-0.29%
-0.06%
-0.src8%
-0.37%
NZD
-0.23%
-0.20%
-0.srcsrc%
-0.src0%
0.src3%
0.src7%
-0.src9%
CHF
-0.02%
-0.0src%
0.07%
0.src0%
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).
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.
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