Market Data 
- Gold gains more than 0.30% despite pressure from high US Treasury yields.
- Hawkish remarks from Fed officials, including Governor Michelle Bowman, temper Gold’s rise.
- XAU/USD traders are eyeing the release of US core PCE inflation data.
Gold price was modestly up late in the North American session, registering gains of around 0.15% amid high US Treasury bond yields that make it less appealing to hold the non-yielding metal. Consequently, the Greenback erased its previous losses, capping Gold’s rally. The XAU/USD trades at $2,357, above its opening price by 0.28%.
Wall Street trades with losses, while the 10-year Treasury note yield climbs sharply to its highest level since the beginning of May. This spurred a jump in real yields, which usually correlate inversely to Gold prices, putting a lid on the yellow metal’s advance.
Federal Reserve (Fed) officials crossed the wires on Tuesday, delivering a hawkish message. On the data front, the Conference Board (CB) Consumer Confidence improved in May, but recession fears have resurfaced.
Ahead in the week, traders are bracing for the expected release of April’s Personal Consumption Expenditures (PCE) Price Index – the Federal Reserve’s (Fed) preferred measure of inflation. The core figure is expected at 2.8% YoY, while headline PCE is foreseen to increase by 0.3% MoM.
Daily digest market movers: Gold price waxes, wanes around $2,350
- Gold prices stay in the green yet trade off three-day highs reached at $2,364 amid elevated US Treasury yields.
- US 10-year Treasury note yields 4.538%, rising seven basis points and underpinning the Greenback. The US Dollar Index (DXY), which tracks the buck’s performance against a basket of peers, trades at 104.61, up 0.03%.
- Fed Governor Michelle Bowman said she would have supported either waiting to slow the quantitative tightening pace or a more tapered slowing in balance sheet run-off.
- Lastly, Minneapolis Fed President Neel Kashkari stated that he doesn’t believe anyone has ruled out further rate increases and added that he anticipates no more than two rate cuts in 2024.
- The US Conference Board Consumer Confidence improved in May after three months of declines, rising to 102.0 from 97.0, exceeding estimates of 95.9.
- Despite improving, Dana Peterson, Chief Economist at The Conference Board, wrote, “a possible resurgence in recession concerns.”
- Americans’ perceptions of the likelihood of US recession over the next 12 months rose again in May.
- Fed funds rate futures estimate just 25 basis points of interest rate cuts in 2024, according to data provided by the Chicago Board of Trade (CBOT).
Technical analysis: Gold price stays firm as buyers lose momentum
Gold’s uptrend remains in place, yet the rally is showing signs of exhaustion, with momentum beginning to fade. The Relative Strength Index (RSI) shows that buyers are in charge yet losing momentum as the RSI flattens.
Therefore, if XAU/USD fails to cling to gains above $2,350, that would exert downward pressure on the yellow metal, exposing key support levels.
The first support would be the psychological $2,350 figure. Once cleared, the next stop would be the May 8 low of $2,303, followed by the May 3 cycle low of $2,277.
On the other hand, if XAU/USD stays above $2,350, further gains lie overhead. Up next would be the $2,400 mark, followed by the year-to-date high of $2,450 and then the $2,500 mark.
Fed FAQs
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.
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.
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.
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.
