Gold reached a fresh all time high thanks to a combination of factors.
The gold price (XAUUSD) attracted some buyers for the seventh day in a row on Wednesday. Reaching a new record high of $2,288-2,289 during the Asian session amid the flight to safety. Against the Backdrop of global uncertainties resulting from the Russia Ukraine war and crises in the Middle East. Uncertainty about the Federal Reserve’s (Fed) plans to decrease rates, and a severe Earthquake in Taiwan weigh on Investors’ sentiment. This is reflected in a generally negative tone in the equities markets. Which serves as a tailwind for the safe-haven precious metal.
A weaker USD adds support, however reduced June Fed rate cut bets may limit gains.
Meanwhile, the US Dollar (USD) extends its overnight retracement decline from its highest level since February 14. Adding to the bid tone surrounding the gold price. Bulls, meanwhile, appear unmoved by the Fed’s lowered expectations on rate reduction. Which tend to pull flows away from the non yielding yellow metal.
However, overstretched conditions on the daily chart limit gains for the Gold. And require care before positioning for future increases. Nonetheless, the aforementioned fundamental background indicates. That the commodity’s path of least resistance is to the upward. Therefore, any A major corrective pullback might be viewed as a buying opportunity. And it is likely to be restricted ahead of US economic data.
Daily Market Movers: Gold price continues underpinned by geopolitical uncertainties and moderate USD depreciation.
Geopolitical tensions rose after Israeli strikes on Iran’s embassy in Syria. Boosting the prospect of additional bloodshed in the Middle East and sending the safe haven gold price to a new record high Wednesday.
Data released this week showed that the US manufacturing sector gained in March for the first time since September 2022. And that labor demand remained high, prompting investors to reduce their predictions for rate reduction in the US.
The Labor Department released the Job Openings and Labour Turnover Survey. (JOLTS) on Tuesday. Which indicated that job opportunities increased little from 8.75 million to a historically high level of 8.76 million in February.
Separately, the Commerce Department announced that orders for manufactured products returned in February. After two consecutive monthly drops, rising more than expected by 1.4% on demand for machinery and commercial aircraft.
San Francisco Fed President Mary Daly stated on Tuesday. That inflation is progressively declining, but she sees no need to lower interest rates. And that three rate cuts this year are an estimate, not a guarantee.
Cleveland President Loretta Mester stated that significant progress has been made on inflation.
Cleveland President Loretta Mester stated that significant progress has been made on inflation. But she wants to see more proof that inflation is approaching the 2% target before lowering interest rates.
This follows Fed Chair Jerome Powell’s statements on Friday. In which he stated that there was no need to rush to decrease interest rates and questioned whether the central bank would drop rates three times this year.
The current market pricing shows a about equal likelihood. That the Federal Reserve will begin cutting rates in June, with a total rate decrease of 65 basis points (bps) for 2024, which is lower than the central bank’s projected 75 bps.
The benchmark 10-year US government bond yield rose to a four-month high, limiting the downside for the US Dollar and capping gains for the non-yielding yellow metal under overbought conditions.
Investors are now looking to the US economic docket , featuring the ADP report on private-sector employment and the ISM Services PMI, which, along with statements by important FOMC members, should provide a new push.
