Gold price consolidates in a range; bulls have the upper hand while above $3,300
- Gold price bulls seem reluctant as a positive risk tone undermines demand for safe-haven assets.
- Thursday’s upbeat US macro data supports the USD, contributing to capping the precious metal.
- Trade-related uncertainties and Fed rate cut bets should help limit losses for the XAU/USD pair.
Gold price (XAU/USD) struggles to capitalize on the previous day's move higher and oscillates in a narrow trading band during the Asian session on Friday amid mixed fundamental cues. Signs of easing tensions between the US and China – the world's two largest economies – remain supportive of a positive tone around the equity markets. Apart from this, a modest US Dollar (USD) uptick turns out to be another factor that contributes to keeping a lid on the precious metal.
Meanwhile, Federal Reserve (Fed) officials showed willingness for potential interest rate cuts, which might cap the USD upside and act as a tailwind for the non-yielding Gold price. Moreover, worries about the potential economic fallout from US President Donald Trump's trade tariffs and persistent geopolitical uncertainties suggest that the path of least resistance for the safe-haven commodity remains to the upside, warranting some caution for aggressive bearish traders.
Daily Digest Market Movers: Gold price traders refrain from placing aggressive directional bets amid mixed cues
- Investors remain hopeful over the potential de-escalation of the US-China trade war, which acts as a headwind for the safe-haven Gold price during the Asian session on Friday. In fact, US President Donald Trump said on Thursday that trade talks between the US and China are underway.
- This comes after China's Foreign Ministry spokesperson Guo Jiakun told reporters that China and the US have not conducted consultations or negotiations on tariffs, and called reports of such information false news. This underscores the uncertainty over the ongoing trade war.
- The US Dollar draws some support from mostly upbeat US macro data released on Thursday. In fact, the US Department of Labor reported that Initial Jobless Claims increased modestly to 222,000 for the week ending 19 April and pointed to continued labor market resilience.
- The US Census Bureau reported that Durable Goods Orders surged 9.2% in March, beating the 2% forecast and marking a third consecutive rise. Transportation equipment also rose for a third month, surging 27%.
- Meanwhile, a duo of Federal Reserve officials discussed the willingness for potential interest rate cuts soon. In fact, Cleveland Fed President Beth Hammack stated that a rate cut as soon as June could be possible if clear and convincing data on economic direction is obtained.
- Separately, Fed Governor Christopher Waller said in a Bloomberg interview that he would support rate cuts if tariffs start weighing on the job market. Moreover, traders are still pricing in the possibility that the Fed will lower borrowing costs at least three times by the end of this year.
- On the geopolitical front, a Russian missile attack on Ukraine’s capital Kyiv killed at least twelve people and injured dozens. This was one of the deadliest strikes since Russia launched its full-scale invasion more than three years ago and keeps the geopolitical risk premium in play.
- Traders now look forward to the release of the revised Michigan US Consumer Sentiment Index. Apart from this, trade-related developments might influence the USD, which, along with the broader risk sentiment, might produce short-term trading opportunities around the XAU/USD pair.
Gold price might attract some dip-buyers and find decent support near the $3,300 mark; bullish bias remains
From a technical perspective, a goodish rebound from the weekly low touched on Wednesday stalls near the 23.6% Fibonacci retracement level of the latest leg up from the vicinity of the mid-$2,900s or the monthly swing low. The said barrier is pegged near the $3,368-3,370 region, which should now act as a key pivotal point. Given that oscillators on the daily chart are holding comfortably in positive territory, a sustained strength beyond should allow the Gold price to reclaim the $3,400 mark. The subsequent move up is likely to extend further towards the $3,425-3,427 intermediate hurdle, above which bulls could make a fresh attempt to conquer the $3,500 psychological mark.
On the flip side, weakness below the $3,330 area might still be seen as a buying opportunity and remain limited near the $3,300 mark, nearing the 38.2% Fibo. level. This is followed by the weekly swing low, around the $3,260 area, which if broken should pave the way for the resumption of this week's rejection slide from the $3,500 mark, or the all-time peak. The Gold price could then accelerate the fall towards the 50% retracement level, around the $3,225 region, en route to the $3,200 mark. Some follow-through selling will suggest that precious metal has topped out and shift the near-term bias in favor of bearish traders.
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.
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