- Gold price catches fresh bids on Thursday and is supported by a softer tone around the equity markets.
- The US Dollar builds on the overnight bounce from a two-month low and should cap gains for XAU/USD.
- Bets that the Federal Reserve will not hike interest rates further could act as a headwind for the Greenback.
Gold price (XAU/USD) builds on its steady intraday ascent through the early part of the European session on Thursday and has now moved back closer to over a one-week high, around the $1,975-1.976 area touched the previous day. A softer tone around the US equity futures is seen as a key factor driving some haven flows towards the precious metal. Apart from this, expectations that the Federal Reserve (Fed) is done with its policy tightening campaign lends additional support to the non-yielding yellow metal.
That said, a further US Dollar (USD) recovery, from its lowest level since September 1 touched in the aftermath of the softer US CPI report on Tuesday, might keep a lid on any further gains for the Gold price. The US Retail Sales declined less than expected in October, which, along with an upward revision of the previous month’s already stronger reading, suggested that the economy is on track for a soft landing. This continues to underpin the Greenback and warrants caution before placing bullish bets around the XAU/USD.
Daily Digest Market Movers: Gold price continues scaling higher amid Fed pause hopes and a softer risk tone
- The US Producer Price Index (PPI) registered its largest decline since April 2020 and fell 0.5% in October. Moreover, data for September was also revised down to show the PPI increasing by 0.4% instead of 0.5%.
- This comes on top of the US CPI report on Tuesday, which showed that consumer inflation was cooling faster than anticipated, and strengthened expectations that the Federal Reserve is done hiking interest rates.
- The headline US Retail Sales fell for the first time in seven months in October, though the decline was less than expected and was accompanied by an upward revision of the September data to show strong gains.
- San Francisco Fed President Mary Daly, in an interview with Financial Times on Wednesday, underscored the uncertainty about whether the central bank has done enough to push consumer price back down to its 2% target.
- This clouded the outlook for when the Fed will begin cutting interest rates, which is seen offering some support to the US Dollar and should contribute to keeping a lid on any meaningful appreciating move for the Gold price.
- Mixed signals from high-level US-China talks temper investors’ appetite for riskier assets and boost demand for traditional safe-haven assets, allowing the precious metal to build on its intraday ascent.
- Market participants now look forward to the US economic docket, featuring the release of Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Industrial Production figures for a fresh impetus.
- Apart from this, speeches by influential Fed officials will be scrutinized for cues about the near-term policy outlook and further contribute to producing short-term trading opportunities around the XAU/USD.
Technical Analysis: Gold price needs to strengthen beyond $1,975-1,976 for bulls to regain control
From a technical perspective, the one-week high, around the $1,975-1,976 area touched on Wednesday now seems to act as an immediate hurdle. A sustained strength beyond has the potential to lift the Gold price further towards the $1,991-1,992 hurdle en route to the $2,000 psychological mark. The momentum could get extended towards a multi-month peak, around the $2,009-2,010 region, which if cleared decisively will be seen as a fresh trigger for bullish traders and pave the way for a further near-term appreciating move.
On the flip side, the $1,955-1,950 area is likely to protect the immediate downside ahead of the 200-day Simple Moving Average (SMA), currently near the $1,935 region. This is closely followed by the 100- and the 50-day SMAs confluence, around the $1,928-1,925 zone, below which the Gold price could turn vulnerable and accelerate the fall towards the $1,900 round figure.
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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.18% | 0.25% | 0.20% | 0.68% | 0.04% | 0.81% | 0.15% | |
| EUR | -0.18% | 0.06% | 0.01% | 0.50% | -0.14% | 0.63% | -0.04% | |
| GBP | -0.25% | -0.06% | -0.04% | 0.45% | -0.20% | 0.58% | -0.10% | |
| CAD | -0.19% | 0.02% | 0.04% | 0.47% | -0.14% | 0.62% | -0.04% | |
| AUD | -0.68% | -0.51% | -0.44% | -0.48% | -0.65% | 0.13% | -0.55% | |
| JPY | -0.03% | 0.13% | 0.19% | 0.17% | 0.65% | 0.78% | 0.10% | |
| NZD | -0.81% | -0.63% | -0.57% | -0.60% | -0.14% | -0.78% | -0.67% | |
| CHF | -0.15% | 0.05% | 0.11% | 0.07% | 0.56% | -0.11% | 0.67% |
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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