Market Data 
- Gold price ticks lower on Monday amid hawkish Fed expectations and a positive risk tone.
- A modest USD downtick helps limit the downside amid persistent geopolitical tensions.
- Traders also seem reluctant ahead of the FOMC meeting and key US macro data this week.
Gold price (XAU/USD) meets with some supply during the Asian session on Monday and erases a major part of its modest gains registered over the past two days. The US Personal Consumption Expenditures (PCE) Price Index released on Friday reaffirmed expectations that the Federal Reserve (Fed) will keep interest rates higher for longer, which, in turn, is seen driving flows away from the non-yielding yellow metal. Apart from this, a generally positive tone around the equity markets further contributes to the offered tone surrounding the safe-haven commodity, though the downside potential seems limited.
The US Dollar (USD) struggles to build on Friday’s goodish bounce from a two-week low and kicks off the new week on a softer note, lending some support to the Gold price. Moreover, the Israel-Hamas conflict in the Gaza Strip, so far, has shown no signs of de-escalation. This, along with the protracted Russia-Ukraine war, keeps geopolitical risks in play and might continue to act as a tailwind for the XAU/USD. Traders might also prefer to wait for the outcome of the crucial two-day FOMC meeting on Wednesday and important US macro releases, including the Nonfarm Payrolls (NFP) report on Friday.
Daily Digest Market Movers: Gold price is undermined by a combination of factors, albeit lacking follow-through selling
- The US Bureau of Economic Analysis reported on Friday that the Personal Consumption Expenditures (PCE) Price Index rose 0.3% in March, while the yearly rate climbed to 2.7% from 2.5% in February, beating estimates for a reading of 2.6%.
- Meanwhile, the core PCE Price Index, which excludes volatile food and energy prices, held steady at 2.8% as compared to 2.6% anticipated, reaffirming hawkish Federal Reserve expectations and exerting pressure on the non-yielding Gold price.
- Further, Israel-Hamas peace talks in Cairo fuel optimism about the de-escalation of tensions in the Middle East, which further boosts investors’ appetite for riskier assets and contributes to driving flows away from the safe-haven precious metal.
- That said, Ukraine attacked more Russian oil refineries over the weekend and also called on more military aid from the US over worsening conditions on the front lines, keeping geopolitical risks in play and lending support to the XAU/USD.
- Apart from this, evidence that inflation in the US is not easing as initially expected should act as a tailwind for the metal, which is seen as a hedge against inflation, ahead of the crucial two-day FOMC monetary policy meeting starting on Tuesday.
- Investors this week will also confront the release of important US macro data scheduled at the beginning of a new month, including the closely-watched monthly jobs data – popularly known as the Nonfarm Payrolls (NFP) report on Friday.
Technical Analysis: Gold price needs to break through $2,352-2,353 confluence for bulls to seize near-term control
From a technical perspective, last week’s bounce from levels below the $2,300 mark faced rejection near the $2,352-2,353 confluence comprising the 50% Fibonacci retracement level of the recent pullback from the all-time peak and the 200-hour Simple Moving Average (SMA). The subsequent downfall, however, showed some resilience below the 100-hour SMA and stalled near the $2,320 area (23.6% Fibo. level), which should now act as a key pivotal point. A sustained break below could make the Gold price vulnerable to retesting last week’s swing low, around the $2,292-2,291 region, before dropping to the next relevant support near the $2,268-2,265 zone.
On the flip side, bulls need to wait for a move beyond the $2,352-2,353 confluence hurdle before placing fresh bets. The Gold price might then accelerate the positive move towards the next relevant hurdle near the $2,371-2,372 region en route to the $2,400 round figure. The momentum could extend further towards the all-time peak, around the $2,431-2,432 area touched earlier this month.
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.
