- Gold price drifts lower for the second straight day amid reduced bets for aggressive Fed easing.
- Geopolitical risks and China’s economic woes could lend support to the safe-haven commodity.
- The USD stalls ahead of the 100-day SMA and might contribute to limiting losses for the metal.
Gold price (XAU/USD) remains under some selling pressure for the second successive day on Monday and drops to a one-week low, around the $2,025 area during the early European session. Friday’s blockbuster US jobs report forced investors to further scale back their expectations regarding the timing and pace of rate cuts by the Federal Reserve (Fed), which continues to push the US Treasury bond yields higher. This, in turn, is seen as a key factor undermining the non-yielding yellow metal.
The US Dollar (USD), however, struggles to capitalize on its intraday uptick and faces rejection ahead of the 100-day Simple Moving Average (SMA), which could lend some support to the Gold price. Apart from this, worries about escalating geopolitical tensions in the Middle East and China’s economy should help limit any further downside for the safe-haven XAU/USD. Traders now look to the US ISM Services PMI and speeches by influential FOMC members for short-term opportunities.
Daily Digest Market Movers: Gold price remains depressed despite subdued USD demand, geopolitical risks
- The robust US employment details released on Friday forced investors to scale back their expectations regarding the timing and pace of rate cuts by the Federal Reserve, which is seen weighing on the Gold price.
- The headline NFP showed that the US economy added 353K new jobs in January, nearly double the 180K anticipated, and the previous month’s reading was also revised higher to 333K from the 216K reported.
- Other details revealed that the Unemployment Rate held steady at 3.7% and wage inflation, as measured by the change in Average Hourly Earnings, rose to 4.5% on a yearly basis as against the 4.1% rise anticipated.
- The probability of a rate cut in March dwindled to approximately 15% from over 65% last month, while the likelihood of a 150-bps rate cut in 2024 has also plummeted to just 25% from being nearly certain previously.
- The yield on the benchmark 10-year US government bond extends the post-NFP rise beyond the 4.0% threshold during the Asian trading hours on Monday and pushes the US Dollar to a fresh high since December.
- A private survey showed that business activity in China’s services sector remained in expansionary territory for 13 straight months, though grew less than expected in January and added to worries about a slowdown.
- Israel’s Prime Minister Benjamin Netanyahu said that the country will not end the war before it completes all of its goals, while media reports suggest that Hamas is set to reject the Gaza ceasefire deal proposed in Paris.
- US Central Command said forces conducted a strike in self-defense against a Houthi land attack cruise missile and struck four anti-ship cruise missiles prepared to launch against ships in the Red Sea.
- This, in turn, could act as a tailwind for the safe-haven precious metal as traders now look to the release of the US ISM Services PMI for short-term opportunities later during the early North American session on Monday.
Technical Analysis: Gold price seems vulnerable to test $2,010-2,009 support and the $2,000 psychological mark
From a technical perspective, acceptance below the 50-day Simple Moving Average and a subsequent slide below Friday’s swing low, around the $2,028-2,027 region, could drag the Gold price to the $2,012-2,010 area. This is followed by the $2,000 psychological mark, which if broken decisively might shift the bias in favour of bearish traders and expose the 100-day SMA support near the $1,983-1,982 region. The XAU/USD could eventually drop to challenge the very important 200-day SMA, near the $1,965 area.
On the flip side, momentum beyond the Asian session peak, around the $2,042 region, is likely to confront a stiff hurdle near the $2,054-2,055 zone ahead of the $2,065 area or last week’s swing high. Given that oscillators on the daily chart are just holding in the positive territory, some follow-through buying has the potential to lift the Gold price towards the $2,078-2,079 region, or the YTD peak set in January. The subsequent move-up should allow the XAU/USD to reclaim the $2,100 mark and climb further to $2,020 resistance.
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 Pound Sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.01% | 0.12% | 0.06% | -0.01% | -0.06% | -0.13% | 0.07% | |
| EUR | -0.01% | 0.11% | 0.04% | -0.02% | -0.07% | -0.15% | 0.06% | |
| GBP | -0.10% | -0.10% | -0.06% | -0.15% | -0.19% | -0.22% | -0.04% | |
| CAD | -0.05% | -0.03% | 0.06% | -0.09% | -0.12% | -0.19% | 0.01% | |
| AUD | 0.01% | 0.05% | 0.15% | 0.09% | -0.04% | -0.10% | 0.10% | |
| JPY | 0.06% | 0.08% | 0.17% | 0.13% | 0.05% | -0.07% | 0.14% | |
| NZD | 0.14% | 0.16% | 0.26% | 0.21% | 0.13% | 0.08% | 0.21% | |
| CHF | -0.06% | -0.05% | 0.04% | -0.01% | -0.07% | -0.13% | -0.19% |
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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