- Gold price catches fresh bids amid Fed rate cut bets, geopolitical risks and China’s economic woes.
- A softer USD lends additional support, through elevated US bond yields cap gains for the metal.
- Traders also seem reluctant to place aggressive bets ahead of US data and FOMC meeting minutes.
Gold price (XAU/USD) attracts some buyers on Wednesday and for now, seems to have snapped a three-day losing streak to the $2,055 area, or a near one-week low touched the previous day. The US Dollar (USD) stalls its recent recovery move from a multi-month low amid expectations about an imminent shift in the Federal Reserve’s (Fed) policy stance. This, along with concerns about fragile economic recovery in China and geopolitical risks, assists the safe-haven commodity to stick to its modest intraday gains through the early European session.
That said, questions about the possibility of early interest rate cuts by the Fed led to the overnight sharp move higher in the US Treasury bond yields. This, in turn, could act as a tailwind for the USD and cap the upside for the non-yielding Gold price. Traders also seem reluctant to place aggressive bullish bets ahead of the FOMC meeting minutes, which will be scrutinized for cues about the Fed’s future policy moves. In the meantime, the US ISM Manufacturing PMI and JOLTS Job Openings data will be looked upon for short-term trading opportunities.
Daily Digest Market Movers: Gold price bulls seem reluctant ahead of FOMC minutes
- A combination of supporting factors assists the Gold price to regain positive traction on Wednesday and snap a three-day losing streak.
- Bets that the Federal Reserve will cut interest rates in March turn out to be a key factor lending support to the non-yielding yellow metal.
- The possibility of a further escalation of conflict in the Red Sea, along with China’s economic woes, also acts as a tailwind for the safe-haven metal.
- The official Chinese PMI released over the weekend indicated a further deterioration in manufacturing activity and little signs of recovery at the end of 2023.
- A private survey showed on Tuesday that China’s factory activity expanded at a quicker pace in December but business confidence for 2024 remained subdued.
- The US Dollar consolidates the overnight strong gains to a more than one-week top, helped by a sharp rise in the US bond yields, and caps the commodity.
- Traders might also prefer to wait on the sidelines ahead of the US ISM Manufacturing PMI, JOLTS Job Openings data and the crucial FOMC meeting minutes.
Technical Analysis: Gold price struggles to build on modest intraday gains
From a technical perspective, the overnight failure near the all-time high closing, around the $2,077-2,078 region, and the subsequent slide warrants caution for bullish traders. The said hurdle should now act as a key pivotal point, which if cleared decisively will set the stage for a move towards reclaiming the $2,100 round-figure mark. Meanwhile, oscillators on the daily chart are holding comfortably in the positive territory and support prospects for the emergence of some dip-buying at lower levels.
The overnight low, around the $2,055 area, now seems to protect the immediate downside ahead of the $2,040 horizontal zone. A convincing break below the latter might turn the Gold price vulnerable to accelerate the downfall further towards the $2,020 intermediate support en route to the 50-day Simple Moving Average (SMA), currently near the $2,008-2,007 region, and the $2,000 psychological mark. Some follow-through selling will expose the $1,960 confluence, comprising the 100- and the 200-day SMAs.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the .
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.16% | -0.11% | 0.04% | 0.11% | -0.15% | -0.18% | -0.07% | |
| EUR | 0.17% | 0.03% | 0.19% | 0.25% | 0.01% | -0.03% | 0.08% | |
| GBP | 0.11% | -0.04% | 0.16% | 0.22% | -0.05% | -0.07% | 0.04% | |
| CAD | -0.03% | -0.19% | -0.15% | 0.06% | -0.18% | -0.21% | -0.11% | |
| AUD | -0.11% | -0.24% | -0.21% | -0.06% | -0.25% | -0.28% | -0.18% | |
| JPY | 0.15% | -0.03% | 0.02% | 0.19% | 0.23% | -0.07% | 0.06% | |
| NZD | 0.18% | 0.03% | 0.07% | 0.24% | 0.30% | 0.03% | 0.11% | |
| CHF | 0.09% | -0.07% | -0.03% | 0.11% | 0.19% | -0.07% | -0.10% |
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).
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.
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