The gold price has steadied near a multi-month peak after reversing an intraday dip on Tuesday. The commodity remains around the $2,120 mark, consolidating its recent gains as traders await more cues regarding the Federal Reserve’s (Fed) stance on interest rates. This wait-and-see approach will likely continue until Fed Chair Jerome Powell’s two-day congressional testimony starts on Wednesday.
Additionally, investors are closely monitoring important US macroeconomic data, particularly the Nonfarm Payrolls (NFP) report due on Friday, which could influence the US Dollar (USD) demand and provide fresh momentum for gold. The prevailing belief that the Fed will initiate rate cuts in June keeps USD bulls cautious and supports the non-yielding precious metal.
Moreover, a slight deterioration in global risk sentiment, driven by ongoing geopolitical tensions and concerns over China’s economic slowdown, is further bolstering gold’s safe-haven appeal. As traders await short-term opportunities, they focus on the US ISM Services PMI release.
Overall, the prevailing fundamental backdrop suggests a bullish bias for gold, with any potential corrective pullbacks likely to be met with buying interest.
Daily Digest Market Movers: Gold Price Awaits Fed’s Rate-Cut Path and US Economic Data
- Friday’s disappointing US macro data and less hawkish Fed comments have reinforced expectations of a June rate cut, lifting gold above $2,100.
- The USD remains under pressure amid expectations of a shift in the Fed’s policy stance, supporting gold amid geopolitical risks.
- Israel’s counter-terrorism operation in Ramallah raises tensions in the Middle East, adding to geopolitical uncertainties.
- Traders await Powell’s testimony and key US economic data for directional cues on gold.
- This week’s focus includes the US ISM Services PMI release and the closely watched Nonfarm Payrolls report.
- Despite China’s 2024 GDP growth target of around 5%, investor confidence remains subdued, offering limited support to gold.
Technical Analysis: Gold Price May Consolidate Amid Overbought Conditions
The recent move-up reaffirms the breakout above key resistance levels, but the daily Relative Strength Index (RSI) signals overbought conditions.
- A period of consolidation or a modest pullback may precede further gains in gold.
- Key support levels include $2,100 and the $2,064-2,062 region, with a break below suggesting further downside potential.
- However, the overall bullish trend remains intact, with potential targets near $2,144-2,145.
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 Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.00% | 0.00% | 0.02% | 0.03% | -0.01% | 0.02% | -0.05% | |
| EUR | -0.01% | 0.01% | 0.01% | 0.01% | 0.00% | -0.01% | -0.03% | |
| GBP | 0.01% | 0.00% | 0.03% | 0.02% | 0.00% | 0.03% | -0.02% | |
| CAD | -0.02% | -0.03% | -0.03% | -0.03% | -0.03% | -0.02% | -0.05% | |
| AUD | -0.04% | -0.02% | -0.03% | 0.00% | -0.02% | -0.02% | -0.05% | |
| JPY | 0.01% | 0.02% | -0.02% | 0.04% | 0.00% | 0.03% | -0.03% | |
| NZD | -0.03% | -0.02% | -0.04% | -0.01% | 0.01% | -0.04% | -0.03% | |
| CHF | 0.04% | 0.03% | 0.03% | 0.06% | 0.07% | 0.03% | 0.06% |
RISK SENTIMENT FAQS
What do the terms”risk-on” and “risk-off” mean when referring to sentiment in financial markets?
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
What are the key assets to track to understand risk sentiment dynamics?
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
Which currencies strengthen when sentiment is “risk-on”?
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
Which currencies strengthen when sentiment is “risk-off”?
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.