- Gold price comes under some renewed selling amid reduced bets for an early Fed rate cut.
- Reduced bets for an early interest rate cut by the Fed exert some pressure on the XAU/USD.
- Geopolitical risks and the uncertain global economic outlook to limit losses for the commodity.
- Traders might also refrain from placing aggressive directional bets ahead of crucial US data.
Gold price (XAU/USD) remains depressed heaving into the European session on Wednesday, albeit lacks follow-through selling and remains confined in a multi-day-old trading range. Traders seem reluctant to place aggressive bets and opt to wait for more cues about the timing of when the Federal Reserve (Fed) will start cutting interest rates. Hence, the focus remains glued to this week’s important US macro releases – starting with the flash PMIs later today, followed by the Advance Q4 GDP print and the Core PCE Price Index on Thursday and Friday, respectively.
Heading into the key data risks, market participants now seem to have pushed back expectations for the first interest rate cut by the Fed to May from March, which, in turn, is seen as a key factor undermining the non-yielding Gold price. That said, a modest pullback in the US Treasury bond yields keeps the US Dollar (USD) bulls on the defensive below the highest level since December 13 touched on Tuesday. This, along with worries about the ongoing conflict in the Middle East and the uncertain global economic outlook, should help limit losses for the safe-haven XAU/USD.
Daily Digest Market Movers: Gold price lacks firm near-term direction amid Fed rate-cut uncertainty
- The incoming US macro data suggested that the economy is in good shape and gives the Federal Reserve more headroom to keep interest rates higher for longer, which, in turn, acts as a headwind for the Gold price.
- The current market pricing indicates a greater chance of the first interest rate cut by the Fed in May, which was initially expected in March, and less aggressive policy easing than is now anticipated by investors.
- The US Dollar (USD) consolidates near a multi-week top and exerts some pressure on the non-yielding metal, though geopolitical risk and the uncertain global economic outlook should help limit deeper losses.
- US military forces struck 3 facilities used by Iranian-affiliated militant groups in western Iraq in direct response to a series of escalatory attacks, raising the risk of a further escalation of tensions in the Middle East.
- Traders also seem reluctant to place aggressive directional bets and prefer to wait on the sidelines ahead of this week’s key US macro releases – the flash PMIs, the Advance Q4 GDP print and the Core PCE Price Index.
- The crucial data will play a key role in influencing market expectations about the Fed’s future policy actions, which, in turn, will drive the USD demand and determine the near-term trajectory for the XAU/USD.
Technical Analysis: Gold price bears have the upper hand while below $2,040-2,042 supply zone
From a technical perspective, the $2,022-2,020 region might offer some support to the Gold price ahead of the weekly trough, around the $2,017-2,016 zone touched on Monday. This is followed by over a one-month low, around the $2,000 psychological mark set last week, which if broken decisively will be seen as a fresh trigger for bearish traders. The XAU/USD might then turn vulnerable to accelerate the fall towards the $1,988 intermediate support before eventually dropping to the 100-day Simple Moving Average (SMA), currently around the $1,972 area, en route to and the 200-day SMA, near the $1,964-1,963 region.
On the flip side, any meaningful strength beyond the $2,029-2,030 immediate hurdle might continue to confront stiff resistance near the $2,040-2,042 supply zone. Some follow-through buying, however, might negate the near-term bearish outlook and trigger a short-covering rally. The Gold price might then climb to the $2,077 area before aiming to reclaim the $2,100 round-figure mark.
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 Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.02% | -0.06% | 0.11% | 0.19% | -0.25% | 0.09% | -0.01% | |
| EUR | 0.02% | -0.04% | 0.13% | 0.18% | -0.22% | 0.10% | 0.01% | |
| GBP | 0.07% | 0.04% | 0.17% | 0.23% | -0.18% | 0.14% | 0.05% | |
| CAD | -0.12% | -0.10% | -0.17% | 0.06% | -0.36% | -0.03% | -0.12% | |
| AUD | -0.18% | -0.18% | -0.23% | -0.07% | -0.38% | -0.11% | -0.19% | |
| JPY | 0.24% | 0.22% | 0.19% | 0.34% | 0.44% | 0.31% | 0.23% | |
| NZD | -0.07% | -0.11% | -0.15% | 0.02% | 0.10% | -0.31% | -0.10% | |
| CHF | -0.01% | -0.03% | -0.07% | 0.13% | 0.22% | -0.23% | 0.08% |
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
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.
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.
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.
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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