- Gold price holds positive ground in Thursday’s Asian session.
- The rise in global gold demand, persistent central bank purchasing, and safe-haven flows might continue to boost the precious metal.
- Investors will monitor the US weekly Initial Jobless Claims and the Fed’s Daly’s speech on Thursday.
Gold price (XAU/USD) trades with a positive bias on Thursday amid the absence of top-tier economic data releases at mid-week. However, multiple headwinds, such as the firmer US Dollar (USD) and the hawkish comments from the US Federal Reserve (Fed) are likely to cap the upside of the precious metal in the near term.
On the other hand, the growth in global gold demand was mainly driven by strong over-the-counter market investment, persistent central bank purchasing, and rising demand from Asian buyers, including China and India, per the WGC’s most recent report. Furthermore, the risk-averse environment and the uncertainties surrounding geopolitical tensions in the Middle East might boost traditional safe-haven assets like gold.
Gold traders await some fresh catalysts. The US weekly Initial Jobless Claims is due on Thursday. Also, San Francisco Fed President Mary Daly, in the dovish wing of the US central bank, is set to speak later in the day. The dovish remarks from Fed officials might cap the downside of the gold price for the time being.
Daily Digest Market Movers: Gold price remains firm amid the multiple headwinds
- Boston Fed President Susan Collins said it will take longer than previously thought to bring inflation down to the 2% target, emphasizing that the rate will likely stay higher for longer.
- New York Fed president John Williams and Minneapolis Fed president Neel Kashkari also indicated that they favor holding rates at current levels for longer.
- Investors have priced in a nearly 55% chance of a quarter-percentage-point rate cut from the Fed in September, down from 85% before the US employment report last week, according to CME’s FedWatch Tool.
- The first reading of the University of Michigan Consumer Sentiment Index is expected to drop from 77.2 in April to 76.0 in May.
- Hamas has agreed to a draft ceasefire agreement that is “far from meeting Israel’s demands, according to Israeli Prime Minister Benjamin Netanyahu.
- The People’s Bank of China (PBoC) increased its gold reserves by 60,000 troy ounces in April, extending its streak of consecutive purchases to 18 months.
Technical Analysis: Gold price stays bullish in the longer term
The gold price edges higher on the day. The yellow metal’s long-term outlook remains positive, with XAU/USD trading above the key 100-day Exponential Moving Average (EMA) on the daily chart.
In the near term, the gold price has been caught in a descending trend channel since mid-April. The consolidative theme remains intact as the 14-day Relative Strength Index (RSI) hovers around the 50-midline.
The initial support level for the precious metal is seen near the $2,300 psychological mark. The next contention level is located at the lower limit of a descending trend channel of $2,260. Extended weakness could drag XAU/USD to a low of April 1 at $2,228, followed by the $2,200 round level.
If we see enough gold demand, the yellow metal could head for a high of May 6 at $2,232. Further north, gold may draw in enough buyers to test the upper boundary of a descending trend channel at $2,345. The additional upside filter to watch is the $2,400 round mark, en route to an all-time high near $2,432.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.09% | 0.38% | 0.23% | 0.41% | 1.32% | 0.01% | 0.26% | |
| EUR | -0.10% | 0.27% | 0.14% | 0.31% | 1.21% | -0.10% | 0.16% | |
| GBP | -0.39% | -0.28% | -0.14% | 0.04% | 0.94% | -0.36% | -0.11% | |
| CAD | -0.23% | -0.13% | 0.14% | 0.18% | 1.10% | -0.24% | 0.03% | |
| AUD | -0.39% | -0.30% | -0.02% | -0.16% | 0.93% | -0.38% | -0.13% | |
| JPY | -1.35% | -1.23% | -0.94% | -1.10% | -0.90% | -1.28% | -1.08% | |
| NZD | 0.00% | 0.09% | 0.37% | 0.21% | 0.39% | 1.31% | 0.27% | |
| CHF | -0.26% | -0.16% | 0.11% | -0.02% | 0.15% | 1.07% | -0.25% |
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).
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
