- Gold price soars to an all-time high of $2,225, defying rising Treasury yields and the strength of the US Dollar.
- The Fed Governor's hawkish comments and upbeat US data were no excuse for the advance of Gold and the US Dollar.
- Markets are awaiting the release of the Fed's core PCE index.
The price of Gold rose during the North American session on Thursday and reached a new all-time high of $2,225 midway through the North American session. Prices of precious metals are trending higher despite the rise in US Treasury yields, which supports the Dollar. Aggressive comments from a Federal Reserve (Fed) policymaker and strong economic data from the United States (US) are keeping US Dollar and Gold prices rising. $2,221 and earn more than 1.20%.
Fed Governor Christopher Waller noted that the US central bank is in no rush to cut rates, although it awaits the start of the easing cycle. However, he needs to see a couple of months of evidence that inflation is slowing toward the Fed's 2% target.
Looking at the data, the US economy grew more than expected. Meanwhile, according to the Initial Jobless Claims (IJC) report, the labor market remains tense. Other data showed consumer sentiment improved, according to a University of Michigan survey, while pending home sales in February rose more than in January.
Throughout the week, Gold traders will be keeping an eye on the release of the Fed's preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index for the month of February.
Daily summary of market movements: The price of Gold advances in tandem with the US Dollar
- Gold prices appear to be rebounding on speculation of a lower February inflation report in the US. Core PCE is expected to slow from 0.4% to 0.3% month-on-month, while core PCE is expected to general increase from 0.3% to 0.4% monthly.
- US GDP rose 3.4%, surpassing the preliminary reading of 3.2%, indicating a strong economy. Core personal consumption expenditure (PCE) for the fourth quarter of 2023 met the Fed's target of 2% quarter-on-quarter.
- Initial jobless claims for the week ending March 23 rose by 210,000, less than the consensus forecast of 215,000 and less than the previous week. The data could prevent the Fed from cutting rates sooner than market participants estimate.
- The University of Michigan Consumer Sentiment Index hit its highest level since July 2021, rising to 79.4, beating estimates of 76.5. Pending home sales rebounded in February, rising 1.6% month-over-month after plunging -4.7% in January and above the consensus of 1.5%.
- Money market traders forecast a 63% chance that the Fed will cut rates by a quarter percentage point in June, down from 70% on Wednesday.
Technical Analysis: Gold Price Surpasses $2,200 as Buyers Remain in Control
Gold's uptrend remains intact, although the Relative Strength Index (RSI) is becoming overbought as XAU/USD pierces the March 21 high of $2,223. When an asset experiences a significant uptrend, its RSI typically surpasses the 70 mark, a sign that bullish momentum is building. An RSI reading above 80 is often considered indicative of an extremely overbought situation. Therefore, if buyers keep the spot price of the yellow metal above the latter figure, further increases will occur, paving the way to reach $2,300.
On the other hand, if XAU/USD falls below $2,200, a pullback towards the Dec. XAU/USD towards $2,100. The next support would be the December 28 high at $2,088.
Frequently asked questions about Gold
Gold has played a key role in human history, as it has been widely used as a store of value and medium of exchange. Today, aside from its brilliance and use for jewelry, the precious metal is considered a safe-haven asset, meaning it is considered a good investment in turbulent times. Gold is also considered a hedge against inflation and currency depreciation, as it is not dependent on any issuer or government.
Central banks are the largest holders of Gold. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and purchase Gold to improve the perception of strength of the economy and currency. High Gold reserves can be a source of confidence for the solvency of a country. Central banks added 1,136 tons of gold worth about $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the largest annual purchase since records exist. Central banks in emerging economies such as China, India and Turkey are rapidly increasing their gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are the main reserve and safe haven assets. When the Dollar depreciates, Gold tends to rise, allowing 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 the price of Gold, 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 fear of a deep recession can cause the price of Gold to rise rapidly due to its status as a safe haven asset. Being a non-yielding asset, Gold tends to rise with lower interest rates, while the higher cost of money usually weighs on the yellow metal. However, most of the movements depend on the behavior of the US Dollar (USD), as the asset is traded in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold in check, while a weaker Dollar is likely to push up Gold prices.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
