- Gold prices maintained positive ground in Thursday’s Asian session.
- Precious metal prices are likely to continue to rise due to rising global demand for gold, sustained central bank purchases, and flows into safe-haven assets.
- Investors will be keeping an eye on weekly new U.S. jobless claims and Thursday’s Fed Daily speech.
Gold prices (XAU/USD) traded with a positive bias on Thursday, with no major economic indicators released mid-week. However, multiple headwinds, including a strong U.S. dollar (USD) and hawkish comments from the U.S. Federal Reserve, are likely to limit upside for precious metals in the short term.
Meanwhile, according to the WGC’s latest report, growth in global gold demand is primarily driven by strong over-the-counter market investment, persistent central bank purchases, and increased demand from buyers in Asia, including China and India. It is said that Additionally, the risk-averse environment and uncertainty surrounding geopolitical tensions in the Middle East could push traditional safe-haven assets such as gold higher.
Gold traders are waiting for a new catalyst. The weekly number of new U.S. jobless claims will be released on Thursday. Also scheduled to speak later in the day is San Francisco Federal Reserve President Mary Daley, a dovish member of the U.S. central bank. Dovish comments from Fed officials may limit the downside in gold prices for the time being.
Daily Digest Market Movers: Gold prices remain strong despite multiple headwinds
- Boston Fed President Susan Collins said it will take longer to bring inflation down to the 2% target than previously thought and stressed that interest rates are likely to remain high for a long time.
- New York Fed President John Williams and Minneapolis Fed President Neel Kashkari also said they supported keeping interest rates at current levels for an extended period of time.
- Investors are pricing in a nearly 55% chance that the Fed will cut interest rates by 0.5 percentage points in September, down from 85% before last week’s U.S. jobs report, according to CME’s FedWatch tool.
- The University of Michigan Consumer Confidence Index is expected to drop to 76.0 in May from 77.2 in April.
- According to Israeli Prime Minister Benjamin Netanyahu, Hamas has agreed to a draft ceasefire agreement that “falls far short of meeting Israel’s demands.”
- The People’s Bank of China increased its gold reserves by 60,000 troy ounces in April and extended its continuous purchasing period to 18 months.
Technical analysis: Gold prices remain bullish in the long run
Gold prices rose slightly on this day. The long-term outlook for the yellow metal remains positive, with XAU/USD trading above the key 100-day exponential moving average (EMA) on the daily chart.
In the short term, gold prices have been in a downtrend channel since mid-April. The unifying theme remains as the 14-day Relative Strength Index (RSI) hovers around the midline of 50.
The first support level for the precious metal appears to be around the psychological mark of $2,300. The next competitive level is located at the lower end of the downtrend channel at $2,260. If the downturn continues, XAU/USD could fall to the April 1 low of $2,228 and then reach the $2,200 round level.
If there is enough demand for gold, the yellow metal could head towards the May 6 high of $2,232. Further north, gold could attract enough buyers to test the upper bound of the downtrend channel at $2,345. An additional upside filter to note is the $2,400 round mark on its way to an all-time high near $2,432.
USD price today
The table below shows the percentage change of the US dollar (USD) against major currencies today. The US dollar was the weakest against the Australian dollar.
| USD | EUR | GBP | CAD | australian dollar | JPY | new zealand dollar | Swiss franc | |
| USD | -0.02% | -0.05% | -0.03% | -0.10% | 0.08% | -0.05% | 0.03% | |
| EUR | 0.02% | -0.02% | 0.00% | -0.05% | 0.07% | -0.01% | 0.08% | |
| GBP | 0.06% | 0.03% | 0.03% | -0.03% | 0.09% | 0.02% | 0.08% | |
| CAD | 0.03% | 0.01% | -0.01% | -0.06% | 0.11% | 0.00% | 0.06% | |
| australian dollar | 0.10% | 0.05% | 0.04% | 0.05% | 0.12% | 0.04% | 0.11% | |
| JPY | -0.09% | -0.09% | -0.10% | -0.08% | -0.14% | -0.07% | -0.02% | |
| new zealand dollar | 0.03% | 0.02% | -0.01% | 0.01% | -0.06% | 0.12% | 0.07% | |
| Swiss franc | -0.02% | -0.08% | -0.08% | -0.06% | -0.12% | 0.02% | -0.07% |
The heat map shows the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select Euro from the left column and move along the horizontal line to Japanese Yen, the percentage change displayed in the box represents EUR (base)/JPY (estimate).
Gold FAQ
Gold has played an important role in human history as it has been widely used as a store of value and a medium of exchange. Today, apart from their brilliance and use as jewellery, precious metals are widely seen as safe assets, meaning they are considered a good investment in turbulent times. Gold is also widely seen as a hedge against inflation and currency depreciation, as it is not dependent on any particular issuer or government.
Central banks are the largest holders of gold. With the aim of supporting their currencies in times of turmoil, central banks tend to purchase gold to diversify foreign exchange reserves and improve perceptions of economic and currency strength. High gold reserves can be a source of confidence in a country’s solvency. Central banks added 1,136 tonnes of gold worth about $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest annual purchase amount since records began. Central banks in emerging countries such as China, India and Turkey are rapidly increasing their gold reserves.
Gold has an inverse relationship with the US dollar and US Treasuries, which are major reserve and safe haven assets. Gold tends to rise when the dollar falls, allowing investors and central banks to diversify their assets during times of turmoil. Gold is also inversely correlated with risk assets. Rising stock markets tend to push gold prices down, while declines in riskier markets tend to favor the precious metal.
Prices may vary depending on various factors. Geopolitical instability and fears of a deep recession can cause the price of gold to quickly rise from its safe-haven status. Gold, a non-yielding asset, tends to rise when interest rates fall, but rising costs usually put pressure on the yellow metal. Still, most moves will depend on how the US dollar (USD) behaves, as the asset is priced in dollars (XAU/USD). A strong dollar tends to suppress gold prices, while a weak dollar can push gold prices up.
