- The price of gold bounces above the 20 -day EMA in the midst of an acceleration of the Fed Rate Cutting expectations.
- The weak US NFP data have strongly weighed on US treasure yields.
- The price of gold ranges from the formation of the symmetrical triangle.
The price of gold (Xau/USD) clings to profits near Friday’s maximum around $ 3,350 during the European trading session on Monday. The precious metal firmly quotes since the conditions of the cooling market have forced traders to increase bets that support interest rate cuts by the Federal Reserve (FED) at the September meeting.
The lowest interest rates by the Fed are favorable for assets without yield, such as gold. Meanwhile, the yields of the 10 -year US treasure bonds are vulnerable by a minimum of a minimum of almost three months around 4.20%.
The US NFP report showed on Friday that the economy added 73,000 new workers, significantly below the estimates of 110,000. In addition, June employment figures were drastically reviewed to 14,000 from 147,000. The unemployment rate rose to 4.2%, as expected, since the previous publication of 4.1%.
According to the CME Fedwatch tool, the probability that the FED cuts interest rates at the September meeting has increased to 80.8% from 41.2% seen Thursday, one day before the publication of NFP data.
Before the US employment data, the traders significantly reduced the Fed Rate Cutting bets for the September meeting, since President Jerome Powell said at Wednesday’s press conference that there is no hurry for feat cuts, since the impact of tariffs announced by President Donald Trump has begun to influence the economy.
Technical Gold Analysis
The price of gold bounces above the 20 -day exponential (EMA) mobile average, which quotes around $ 3,323. The general tendency of the price of gold remains lateral while quoting within the formation of the symmetrical triangle, indicating indecision among market participants.
The 14-day relative force (RSI) index oscillates within the range of 40.00-60.00, indicating a strong contraction of volatility.
Looking down, the price of gold would fall towards the round level support of $ 3,200 and the minimum of May 15 in $ 3,121, if it breaks below the minimum of May 29, $ 3,245.
Alternatively, the price of gold will enter unexplored territory if it breaks decisively above the psychological level of 3,500 $. Potential resistances would be $ 3,550 and $ 3,600.
Daily Gold Graph
GOLD – FREQUENT QUESTIONS
Gold has played a fundamental role in the history of mankind, since it has been widely used as a deposit of value and a half of exchange. At present, apart from its brightness and use for jewelry, precious metal is considered an active refuge, which means that it is considered a good investment in turbulent times. Gold is also considered a coverage against inflation and depreciation of currencies, since it does not depend on any specific issuer or government.
Central banks are the greatest gold holders. In their objective of supporting their currencies in turbulent times, central banks tend to diversify their reserves and buy gold to improve the perception of strength of the economy and currency. High gold reserves can be a source of trust for the solvency of a country. Central banks added 1,136 tons of gold worth 70,000 million to their reservations in 2022, according to data from the World Gold Council. It is the largest annual purchase since there are records. The central banks of emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has a reverse correlation with the US dollar and US Treasury bonds, which are the main reserve and shelter assets. When the dollar depreciates, the price of gold tends to rise, which allows investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rebound in the stock market tends to weaken the price of gold, while mass sales in higher risk markets tend to favor precious metal.
The price of gold 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 condition of active refuge. As an asset without yield, the price of gold tends to rise when interest rates lower, while the money increases to the yellow metal. Even so, most movements depend on how the US dollar (USD) behaves, since the asset is quoted in dollars (Xau/USD). A strong dollar tends to keep the price of gold controlled, while a weakest dollar probably thrusts 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.
