- Gold prices attract sellers for the second day in a row, amid wide strong US dollars.
- The risk-off mood and US bond yield slides do little to support precious metals.
- Traders are currently looking forward to the US PCE Price Index for meaningful driving forces.
Gold prices (XAU/USD) are now low for the second day in a row – also marking the third day of the previous four negative moves, surpassing the region of $2,861-$2,860 during Friday's Asian session, reaching its lowest level in about two weeks. The US Dollar (USD) extends this week's recovery move from its third consecutive low since December 10th, amid bets that the Federal Reserve will stick to Hawkish's stance behind still notable inflation. This is considered an important factor in order to move away from non-two yellow metals.
However, traders may choose to wait for the release of US Personal Consumption Expense (PCE) price index data for queues on the Fed's rate cut path. In the meantime, uncertainty over President Donald Trump's tariff plans could, along with a risk-off impulse, give support for safe haven precious metals. A global flight to safety could cause new legs in US Treasury bond yields, further contributing to limiting Xau/USD losses, and pay attention to bears.
Daily Digest Market Movers: Gold Prices are pressured by some follow-through USD purchases
- Data released Thursday revealed that U.S. inflation continues to rise and supports lawsuits for the Federal Reserve to stabilize interest rates. This will help the US dollar build on recovery from a low of more than two months, dragging it to a low of two weeks on Friday to a low of two weeks.
- The US Bureau of Economic Analysis has released its second reading of the US Gross Domestic Product. This showed that the economy expanded at an annual pace of 2.3% in the final quarter of 2024, as mentioned previously.
- This comes from concerns that US President Donald Trump's policies will rekindle inflation. Additionally, Fed officials rely on future interest rate cuts amid sticky inflation. This continues to support USD and contributes to the operation flow from non-two yellow metal.
- Kansas City Fed President Jeff Schmidt said Thursday that a recent survey showed rising consumer inflation expectations and that central banks must continue to focus on fully including price pressure.
- Adding to this, Federal President of Cleveland, Beth Hamac, noted that interest rates are likely pending for the time being as inflation data begins to cause growing problems for central policymakers.
- Separately, Philadelphia Fed President Patrick Harker noted that progress towards the 2% inflation target has slowed down and policy rates remain limited to continue putting downward pressure on inflation.
- Therefore, the market focus remains glued to the release of the US Personal Consumption Expense (PCE) Price Index, scheduled for later in the North American session. Important inflation data affects the Fed's outlook for interest rates.
- Meanwhile, investors continue to worry about potential economic fallouts from Trump's tariff plans. In fact, Trump said his proposed tariffs in Canada and Mexico would go into effect on March 4th as scheduled, threatening to announce a 25% tariff on imports from the European Union.
Gold prices are vulnerable. A breakdown below 23.6% FIBO. Play level support
From a technical standpoint, the latest legdown dragged gold prices more than the 23.6% Fibonacci retracement level of the December-February rally. Additionally, daily chart oscillators are just beginning to gain negative traction, supporting the prospect of an extension of the correction from this week's all-time high peak. Some follow-throughs below the $2,856-2,855 horizontal zone will double-check the negative bias and drag the Xau/USD pair to the next relevant support near the $2,834 region on the way to 38.2% Fibo. Levels, $2,815-2,810 Region. This is followed by the $2,800 mark. This definitively suggests that if it breaks, the item has been on top, paving the way for even deeper losses.
On the back, you could face tough resistance near Asia's session peak, ahead of the $2,867 area (23.6% Fibo. Level) and the area's roughly 2,900 mark at $2,885. The sustained strength beyond the latter allows the gold price to be further increased to a horizontal support breakpoint of $2,915. This should now serve as an important point. Some follow-through purchases have shifted bias in favour of bullish traders, exposing a record high peak around the $2,956 region, and there are mid-hurdles near the $2,934 zone.
Gold FAQ
Gold has played an important role in human history as it is widely used as a medium of value and exchange. Apart from the gem's brilliance and usage, precious metals are now widely viewed as safe haven assets. In other words, it is considered a good investment in times of turbulence. Gold is also widely viewed as a hedge against inflation and depreciation currencies, as it is not dependent on a particular issuer or government.
The central bank is the largest holder of money. With the aim of supporting currency in turbulent times, central banks tend to buy gold to diversify reserves and improve the perceived strength of the economy and currency. High gold reserves provide a source of trust in the country's solvency. The central bank added 1,136 tonnes of gold to its bookings in 2022, worth around $70 billion, according to data from the World Gold Council. This is the best purchase every year since the record began. Central banks in emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold is inversely correlated with the US dollar and the US Treasury, both major reserve assets and safe haven assets. As the dollar depreciates, gold tends to rise, allowing investors and central banks to diversify their assets during turbulence. Gold is also inversely correlated with risk assets. While rallies in the stock market tend to weaken gold prices, selling in high-risk markets tends to favor valuable metals.
A wide range of factors allow prices to move. The fear of geopolitical instability or deep recession can quickly escalate gold prices due to their safe conditions. As an asset that does not yield, gold tends to rise at lower interest rates, but the cost of higher money usually weighs the yellow metal. Still, most movements depend on how the US dollar (USD) works, as assets are priced in dollars (Xau/USD). Strong dollars tend to keep the price of gold down, while weaker dollars can push the price of gold up.
