Created
: 2024.04.09
2024.04.09 12:28
Gold price (XAU/USD) enters a bullish consolidation phase during the Asian session on Tuesday and oscillates in a range below the $2,350 level, or the all-time peak touched the previous day. Expectations that the Federal Reserve (Fed) could delay cutting interest rates keep the US Treasury bond yields elevated and act as a tailwind for the US Dollar. This, along with a generally positive risk tone, holds back bulls from placing fresh bets around the non-yielding yellow metal amid extremely overstretched conditions on the daily chart.
Meanwhile, any meaningful corrective decline still seems elusive in the wake of fading optimism over talks on a potential Israel-Hamas ceasefire and the protracted Russia-Ukraine war, which might continue to underpin the safe-haven Gold price. Investors might also prefer to wait for more cues about the Fed's rate-cut path before placing fresh bets. Hence, the focus will remain on the release of the US consumer inflation figures for March and the FOMC minutes on Wednesday, which will provide a fresh directional impetus to the XAU/USD.
From a technical perspective, the Relative Strength Index (RSI) on the daily chart is flashing extremely overbought conditions and warrants some caution for bullish traders. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before positioning for an extension of the recent blowout rally witnessed over the past two weeks or so. In the meantime, any corrective decline below the Asian session low, around the $2,336 area, is likely to find decent support and remain limited near the $2,300 mark. The said handle should act as a key pivotal point, which, if broken decisively, might prompt some technical selling and drag the Gold price further towards the $2,267-2,265 horizontal support.
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.
Created
: 2024.04.09
Last updated
: 2024.04.09
FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.
We hope you find this article useful. Any comments or suggestions will be greatly appreciated.
We are also looking for writers with extensive experience in forex and crypto to join us.
please contact us at [email protected].
Disclaimer:
All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.
The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.
Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy