- Gold price reverses an intraday dip and flirts with a multi-month peak set on Monday.
- A slight deterioration in the global risk sentiment acts as a tailwind for the commodity.
- Bets for a June Fed rate cut keep the USD bulls on the defensive and also lend support.
Gold price (XAU/USD) is seen oscillating in a range through the early European session on Tuesday and consolidating its recent strong gains to a three-month top, around the $2,120 area touched the previous day. Traders now seem reluctant and opt to wait for more cues about the Federal Reserve’s (Fed) rate-cut path before placing fresh directional bets. Hence, the focus will remain glued to Fed Chair Jerome Powell’s two-day congressional testimony starting on Wednesday.
Apart from this, investors this week will confront the release of important US macro data scheduled at the beginning of a new month, including the key monthly employment data, or the Nonfarm Payrolls (NFP) report on Friday. This, in turn, will drive the US Dollar (USD) demand and provide a fresh impetus to the precious metal. In the meantime, bets that the Fed will start cutting rates in June keep the USD bulls on the defensive and lend support to the non-yielding Gold price.
Furthermore, a slight deterioration in the global risk sentiment, amid persistent geopolitical tensions and concerns about a slowdown in China, lends additional support to the safe-haven XAU/USD. Traders now look to the US ISM Services PMI to grab short-term opportunities. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for the Gold price is to the upside and any corrective slide is more likely to get bought into.
Daily digest market movers: Gold price awaits cues about the Fed’s rate-cut path before the next leg up
- Friday’s disappointing US macro data, along with less hawkish comments by Federal Reserve officials, reaffirmed bets for a June rate cut and lifted the Gold price above the $2,100 mark on Monday.
- The US Dollar, meanwhile, remain on the defensive amid firming expectations for an imminent shift in the Fed’s policy stance, which, along with geopolitical risks, benefit the safe-haven metal.
- Israel conducted a counter-terrorism operation – the biggest in years – in the Palestinian administrative capital of Ramallah, raising the risk of a further escalation of tensions in the Middle East.
- Investors look to Fed Chair Jerome Powell’s two-day testimony for more cues on the path of interest rates and important US macro data to determine the next leg of a directional move for the XAU/USD.
- A rather busy week kicks off with the release of the US ISM Services PMI later this Tuesday, though the focus will remain glued to the closely watched US Nonfarm Payrolls (NFP) report on Friday.
- China’s Premier Li Qiang delivered the opening remarks at the National People’s Congress (NPC) annual meeting on Tuesday and said that the foundation of economic recovery is not solid yet.
- Earlier Reuters reported, citing an official work report, that China will target around 5% GDP growth for 2024, though it fails to boost investors’ confidence or provide any impetus to the XAU/USD.
Technical Analysis: Gold price might consolidate amid overbought RSI on the daily chart
From a technical perspective, the overnight strong move-up reaffirmed last week’s breakout through the $2,062-2,064 strong horizontal barrier and support prospects for additional gains. That said, the Relative Strength Index (RSI) on the daily chart is already flashing overbought conditions and makes it prudent to wait for some near-term consolidation or a modest pullback before the next leg up. Nevertheless, the Gold price remains on track to surpass the $2,020-2,025 intermediate hurdle and aim to retest the all-time peak, around the $2,144-2,145 zone touched early December.
On the flip side, the $2,100 round figure now seems to protect the immediate downside. Any subsequent decline might now be seen as a buying opportunity and remain limited near the aforementioned resistance breakpoint, now turned support, near the $2,064-2,062 region. That said, a convincing break below the latter might prompt some technical selling and drag the Gold price further towards the 50-day Simple Moving Average (SMA), currently pegged near the $2,037-2,035 region. The corrective slide could extend further towards the $2,020 area or the 100-day SMA.
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 Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.00% | 0.00% | 0.02% | 0.03% | -0.01% | 0.02% | -0.05% | |
| EUR | -0.01% | 0.01% | 0.01% | 0.01% | 0.00% | -0.01% | -0.03% | |
| GBP | 0.01% | 0.00% | 0.03% | 0.02% | 0.00% | 0.03% | -0.02% | |
| CAD | -0.02% | -0.03% | -0.03% | -0.03% | -0.03% | -0.02% | -0.05% | |
| AUD | -0.04% | -0.02% | -0.03% | 0.00% | -0.02% | -0.02% | -0.05% | |
| JPY | 0.01% | 0.02% | -0.02% | 0.04% | 0.00% | 0.03% | -0.03% | |
| NZD | -0.03% | -0.02% | -0.04% | -0.01% | 0.01% | -0.04% | -0.03% | |
| CHF | 0.04% | 0.03% | 0.03% | 0.06% | 0.07% | 0.03% | 0.06% |
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).
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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