Created
: 2024.11.09
2024.11.09 04:11
Gold prices had fallen on Friday as the Greenback stages a recovery despite falling US Treasury yields. Traders continued to digest Donald Trump's victory in the US election, and they reduced their exposure on the so-called "Trump trade" due to uncertainty over tariffs. The XAU/USD trades at $2,688, down over 0.67%.
US equities extended their gains, shrugging off election jitters, which were the main drivers of the Bullion's advance. However, risk over US politics has faded, and market participants would look toward Trump's policies.
Following his victory, the US Dollar strengthened, even though investors expect a less dovish Federal Reserve (Fed). Some of Trump's policies are seen as inflation prone, which would exert pressure on the US central bank.
On Thursday, the Fed reduced interest rates, acknowledging a strong economy, a cooling labor market, and an evolving disinflation process. However, Fed officials commented that inflation "remains somewhat elevated" despite approaching the 2% target.
Fed Chair Jerome Powell failed to provide forward guidance on monetary policy and kept his options open at upcoming meetings. He emphasized that the Fed could afford to take its time to lower rates due to the strong economy. He acknowledged that policy remains restrictive, even after today's rate cut, as officials aim to bring rates to neutral levels.
The US economic schedule featured the release of the University of Michigan (UoM) Consumer Sentiment for November, which crushed October's final reading. The same report revealed Americans mixed views on inflation expectations in the short and long term.
Next week, the US economic docket will influence Gold's path. Traders will eye comments from Federal Reserve officials, along with key data releases on consumer and producer inflation and retail sales.
Gold price retreats from two-day peak near $2,700, a crucial level which was broken on Wednesday and buyers had remained unable to crack. If sellers keep holding firm and send prices below the November 6 low of $2,652, look for a push to challenge $2,639, ahead of testing the October 10 low of $2,603.
On the other hand, if Gold clears $2,700, buyers would eye the 20-day SMA at $2,718, ahead of $2,750, followed by the October 23 high at $2,758.
Momentum remains neutral as the Relative Strength Index (RSI) fluctuates around its neutral line, a sign that XAU/USD might lack clear direction and consolidate.
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
: 2024.11.09
Last updated
: 2024.11.09
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