Gold price extends recovery as markets react to downbeat jobs data
- Gold price trades in positive territory for a consecutive day on Tuesday amid the softer USD.
- A downbeat US jobs data for April prompted speculation of potential rate cuts by the Fed in the coming months.
- Investors will keep an eye on Fed’s Kashkari’s speech later on Tuesday.
Gold price (XAU/USD) extends its recovery on Tuesday. The uptick of the yellow metal is bolstered by the weaker US dollar (USD) after recent US Nonfarm Payrolls (NFP) data boosted bets that the Federal Reserve (Fed) would cut interest rates later this year. The expectation of an easing cycle might lift the gold price as it makes gold a cheaper option for foreign buyers to purchase. Furthermore, strong central bank purchases and demand from Asian markets remain to support the precious metal in the near term.
Nonetheless, the signs of ongoing political tensions in the Middle East might boost the safe-haven flows and benefit the gold price. Fed Bank of Minneapolis President, Neel Kashkari, is scheduled to speak later on Tuesday. The hawkish tone from the Fed officials might support the USD and weigh on the USD-denominated gold.
Daily Digest Market Movers: Gold price remains firm amid inflationary environment and uncertainty
- Richmond Fed President Thomas Barkin said that the current interest rate level should cool the economy enough to bring down inflation to the 2% target, with the strength of the job market giving officials time to gain confidence that inflation will fall.
- New York Fed President John Williams stated that there would be rate cuts eventually. Williams further stated that he is seeing job growth moderating and the Fed is looking at the “totality” of data.
- Markets have priced in rate cuts worth 46 basis points (bps) from the Fed by the end of 2024, with the first cut expected in September or November, according to LSEG’s rate probability app.
- Hamas announced its acceptance of an Egyptian-Qatari cease-fire plan on Monday. However, Israel turned down the deal since it did not fulfill its “core demands” and continued its attack on Rafah in southern Gaza. Still, Israel said that it will continue negotiating, per Reuters.
- Gold has advanced about 12% this year despite the elevated inflationary environment and uncertainty over when the US Fed will cut rates.
- The US employment data showed job growth in the US slowed more than expected in April, while the increase in annual wages fell below 4.0% for the first time in nearly three years.
Technical Analysis: Gold price seems poised to consolidate further in the near term
Gold price trades on a positive note on the day. The yellow metal maintains the constructive outlook unchanged, as XAU/USD is above the key 100-day Exponential Moving Average (EMA) on the daily timeframe.
In the shorter term, the gold price has remained confined within a descending trend channel since mid-April. Nonetheless, the path of least resistance is to the upside as the 14-day Relative Strength Index (RSI) holds in the bullish territory around 58.0.
The confluence of the upper boundary of a descending trend channel and a high of April 26 in the $2,350–$2,355 zone will be the first upside target for the precious metal. Further north, the next barrier will emerge near the $2,400 psychological mark, and then an all-time high near $2,432.
On the flip side, the $2,300 round figure acts as an initial support level for XAU/USD. The key contention level is seen at $2,275, representing a low of May 3 and the lower limit of a descending trend channel. The additional downside filter to watch is a low of April 1 at $2,228, followed by the $2,200 round mark.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.02% | 0.02% | 0.03% | 0.00% | 0.15% | -0.02% | 0.06% | |
| EUR | -0.02% | 0.00% | 0.02% | 0.00% | 0.15% | -0.05% | 0.06% | |
| GBP | -0.02% | 0.01% | 0.02% | 0.01% | 0.16% | -0.03% | 0.07% | |
| CAD | -0.03% | -0.01% | -0.02% | 0.00% | 0.14% | -0.06% | 0.06% | |
| AUD | 0.00% | -0.01% | -0.01% | 0.00% | 0.15% | -0.04% | 0.06% | |
| JPY | -0.15% | -0.17% | -0.17% | -0.14% | -0.17% | -0.20% | -0.09% | |
| NZD | 0.03% | 0.03% | 0.03% | 0.04% | 0.04% | 0.19% | 0.10% | |
| CHF | -0.08% | -0.07% | -0.07% | -0.06% | -0.05% | 0.08% | -0.10% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
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.