Created
: 2024.07.03
2024.07.03 04:03
Gold price slid during the North American session as market participants digested Federal Reserve (Fed) Chair Jerome Powell's comments at a European Central Bank (ECB) forum in Portugal. Powell turned slightly dovish, yet US Treasury yields remained firm. The Greenback fluctuated but remained within familiar levels. Therefore, the XAU/USD trades at $2,324, down 0.28%.
Powell commented that the disinflation process has resumed yet stated that he'd like to see further progress before cutting interest rates. He added, "Because the US economy is strong and the labor market is strong, we have the ability to take our time and get this right."
He acknowledged the Fed's dual mandate risks had become more balanced, noting that "we have to manage them."
US jobs data revealed that job vacancies surprisingly rose above estimates, displaying the robustness of the labor market amid high interest rates of 5.25%-5.50% set by the Fed.
Further data is expected on Wednesday, led by the release of the Federal Open Market Committee's (FOMC) last Meeting Minutes, alongside Services PMIs from S&P Global and the Institute for Supply Management (ISM).
Data will resume on Friday as US markets will be closed on Thursday due to Independence Day. By Friday, traders will be focused on June's Nonfarm Payrolls (NFP) report.
Gold is upwardly biased but consolidates near the Head-and-Shoulders neckline around $2,320-$2,350. Despite the bearish chart pattern, momentum has turned neutral with the Relative Strength Index (RSI) nearing its 50-neutral line. That indicates a stalemate between buyers and sellers.
For a bearish continuation, sellers must drive prices below $2,300. If successful, the next demand zone would be the May 3 low of $2,277, followed by the March 21 high of $2,222. Further declines would target the Head-and-Shoulders pattern objective between $2,170 and $2,160.
Conversely, if buyers break through $2,350, they would aim for key resistance levels, such as the June 7 cycle high of $2,387, eventually targeting the $2,400 mark.
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
: 2024.07.03
Last updated
: 2024.07.03
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