At the beginning of trading this week, XAU/USD (gold) futures fell as investors continued to book profits after the yellow metal touched record highs. However, market analysts expect that XAU/USD (gold) prices could renew their upward trajectory on the back of a weak US dollar and shifting expectations that the Federal Reserve will cut US interest rates as 2024 approaches.
XAU/USD (gold) prices fell to the $1982 support level, before settling around $1992 an ounce at the time of writing. The last gold market gains affected the $2033 resistance level, its highest level in a year. In general, gold prices began to exit from their weekly gains by 1%, and their rise since the beginning of the year 2023 to date is close to 10%. In the same performance, the price of silver, the sister commodity to gold, fell below the $25 threshold. Despite this, the price of the white metal also rose by more than 3% last week, raising its gains since the beginning of the year 2023 to date to more than 3%.
Industry observers agree that the main driver of the gold sell-off was profit-taking. With the metal commodity rising to levels not seen in nearly three years, investors want to reap some of those gains.
The US Dollar Index (DXY), a measure of the greenback against a basket of other major currencies, rose to 102.59, from an opening of 102.09. The index rose 0.5 percent last week but is still down about 1 percent year on year. Generally, a stronger profit is bad for commodities because it makes it more expensive for foreign investors to buy.
Meanwhile, economic data had a muted effect on gold trends. The smaller-than-expected US jobs report for March was still impressive, investors believe that the Federal Reserve will continue to raise interest rates at the Federal Open Market Committee (FOMC) meeting next month.
As is well known, the gold market is generally sensitive to movements in interest rates because it can affect the opportunity cost of owning non-returnable commodities.
The US Treasury market was mostly higher across the board, with the benchmark 10-year yield up three basis points to 3.413%. However, all eyes will be on the US Consumer Price Index (CPI) for March, which will be released on Wednesday. Annual US inflation is expected to decline to 5.2%, and the core consumer price index, which wipes out the volatile food and energy sectors, is expected to rise to 5.6%.
In other metals markets, copper futures fell to $3.9865 a pound. Platinum futures fell to $1003.00 an ounce. Palladium futures fell to $1,404.50 an ounce.
US stock futures were flat and Asian stocks rose in thin holiday trade as investors assessed the Fed's policy path after Friday's US jobs data. The Standard & Poor's 500 contracts fell less than 0.1 percent, while MSCI's Asia-Pacific stock index rose 0.2 percent. Meanwhile, markets across Europe, Hong Kong, and Australia are closed for the Easter holidays and volumes are expected to be light.
Treasury yields have fallen across the curve in Asia after jumping on Friday when US monthly payroll data boosted bets of a Fed rate hike in May. The figures also eased concern that the world's largest economy was heading toward a recession. Investors are closely watching Bank of Japan Governor Kazuo Ueda, who will hold his inaugural press conference later on Monday. As Chinese military exercises around Taiwan, after the visit of the island's president to the United States, increased the sense of caution in the Asian markets.
According to official figures, US payrolls rose at a pace of 236,000 in March, in line with expectations, followed by an upwardly revised 326,000 advances in February. The country's unemployment rate fell again to near a record low of 3.5 percent. Trading swaps showed that the odds of a quarter-percentage point increase in the US interest rate at the Fed's May meeting rose to about two in three, up from roughly 50-50 before the data fell. Investors were desperate to cut interest rates later this year as economic data fell short of estimates, suggesting that the US economy is slowing.
XAU/USD (gold) Technical Outlook:
The recent selling of XAU/USD (gold) price has not yet taken it out of its bullish range, as it is still close to the historical psychological resistance of $2000 an ounce. According to the performance on the daily chart below, there will be no reversal of the bullish outlook in principle without moving towards the support levels of 1965 and 1930 dollars an ounce.
I expect that XAU/USD (gold) will continue to fluctuate near its recent gains until the markets react to the announcement of the US inflation figures and the reaction to the contents of the minutes of the last meeting of the US Federal Reserve Bank.
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