XAU/USD climbs 1.31%, touching a record after US GDP growth disappoints in Q4 2024.
US Treasury yields drop as markets adjust to Fed's steady stance despite economic signals.
Despite robust job market, Gold rallies as Fed Chair Powell hints at cautious approach to rate cuts.
Gold price skyrockets to a new all-time high (ATH) of $2,798 on Thursday after economic data from the United States (US) indicated the economy is slowing down, warranting the Federal Reserve (Fed) to lower interest rates despite holding them steady at Wednesday’s meeting. At the time of writing, the XAU/USD trades at $2,794, up 1.31%.
The yellow metal exploded on Thursday after being contained by the $2,770 figure for the last three days. US Treasury yields edged lower as traders grew disappointed following the last reading of 2024 of the fourth quarter Gross Domestic Product (GDP), which, although expanding, did so at a lower rate than expected.
Meanwhile, the jobs market remains robust, as the number of people applying for unemployment benefits decreased compared to the previous reading, according to the US Department of Labor.
Bullion prices soared, although the Fed held rates unchanged on Wednesday. Fed Chair Jerome Powell stated that policy is well-positioned and that they are not in a rush to cut interest rates.
Daily digest market movers: Gold price ignores mixed US data
US GDP for Q4 204 dipped from 3.1% in Q3 to 2.3%, missing the mark. According to the US Department of Labor, Initial Jobless Claims for the week ending January 24 fell to 207K, coming in lower than the expected 220K and the previous week's 223K.
Gold’s advance is also sponsored by the fall of US yields. The US 10-year T-note yield dropped two basis points down to 4.516%. US real yields, as measured by the 10-year Treasury Inflation-Protected Securities (TIPS), followed suit, tumbling two basis points to 2.138%.
Bullion prices are also unfazed by a hawkish Fed, which unanimously voted to keep interest rates steady at 4.25% - 4.50% on Wednesday. The central bank cited a resilient US economy, limited progress in reducing inflation, and a recovering labor market as key factors behind the decision.
While Trump’s plans are still unclear, he set a deadline of Saturday for tariffs of 25% on Mexico and Canada, and has also said he intends to impose across-the-board levies that are “much bigger” than the 2.5% figure previously suggested by Treasury Secretary Scott Bessent.
The swaps market is pricing 50 bps of Fed rate cuts in 2025.
XAU/USD technical outlook: Gold lurks near $2,800 as bulls’ eye $3,000
Gold’s uptrend has resumed with the precious metal hitting a record high of $2,798. Bulls path toward $2,800 is clear, and buyers could test key psychological levels like $2,850, $2,900 and $3,000.
Conversely, sellers must drag XAU/USD’s prices below $2,750, so they could remain hopeful of testing $2,700. Further downside is seen below the latter, with the next key support at $2,663, the confluence of the 50 and 100-day Simple Moving Averages (SMAs).
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
* The content presented above, whether from a third party or not, is considered as general advice only. This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.
