Platinum prices were down on Wednesday as commodities markets experienced a broad selloff. The silvery metal traded at $934.02 per ounce at the time of writing after losing 0.15 percent of its value in intraday trading. The commodity stares at the likelihood of recording a second successive day of losses and potentially reversing the upturn signals sent in late April.
There has been a general decline in safe haven demand for precious metals, including platinum, palladium, silver, and gold. This has been driven by the cooling of geopolitical tensions in the Middle East in the last two weeks. Furthermore, the US dollar has been stronger than most leading fx market currencies during that period, making it more expensive to purchase precious metals.
However, Israel’s Prime Minister Benjamin Netanyahu threw a spanner in the works on Tuesday when he reiterated that a ground offensive on the highly-populated Rafah city would go on with or without a ceasefire deal. That could add geopolitical premium to platinum prices and help it reverse recent losses. Many analysts have stated that a ground offensive in Rafah would be a significant turning point in the nearly six-month old war. However, there has been no escalation in recent weeks despite threats from either side, making many commodity prices unresponsive to such news.
Meanwhile, the US dollar is likely to be the single-largest source of headwinds to platinum prices. The DXY has returned above 106, signaling a continuation of strengthening against six of the major global currencies. Also, the Federal Reserve is expected to retain the current 5.25%-5.0% interest rate in its announcement on Wednesday, and that is expected to buttress the dollar’s strength. Furthermore, high-yielding US treasury bonds will continue to be more attractive to investors than non-yielding platinum. As of this writing, yields on benchmark 10-year US treasury bonds are above 4.680%.
Technical analysis
Our platinum price forecast shows that the pivot is at 935.21, and the downside is likely to prevail if resistant remains at that mark. With the sellers in control, the commodity will find the first support at 930.00. Furthermore, a continuation of the bearish control could break the support and potentially test 925.21. On the other hand, a move above 935.21 will favour the buyers to be in control, with the next resistance likely to be at 938.54. Furthermore, a break past that level will invalidate the downside narrative and favour the bulls to test 945.65 in extension.
Oil prices declined for the third consecutive day, influenced by optimism over a potential ceasefire in the Middle East and rising U.S. crude inventories and production levels. The ongoing negotiations, spearheaded by Egypt between Israel and Hamas, have lessened fears of conflict escalation and supply disruptions, contributing to the downward pressure on oil prices.
Additionally, U.S. crude oil production increased significantly, recording the largest monthly rise in over three years, reaching 13.15 million barrels per day in February. This surge in supply, coupled with growing inventories, suggests a potential easing in oil prices.
Gold price licks wounds near four-week lows ahead of US jobs data, Fed decision.
US Dollar rebounded with US Treasury bond yields on Tuesday, as risk-off flows underpinned.
Further downside looks likely for Gold price amid bearish RSI on the daily chart.
Gold price is catching a breather early Wednesday, having hit a four-week low at $2,285 on Tuesday. Traders refrain from placing fresh directional bets on Gold price, anticipating the all-important US Federal Reserve (Fed) interest rate decision due later in the day.
Gold price looks vulnerable, as the Fed verdict looms
The Fed is widely expected to hold the Fed Funds Rate steady in the range of 5.25% to 5.5% at its May policy meeting. However, the path forward on the interest rates is likely to be laid out in the policy statement and Fed Chair Jerome Powell’s press conference will set the tone for Gold markets in the coming weeks.
Markets are pricing in the first Fed rate cut in September but the chances of that have been slashed to about 47% from over 60% seen a week ago, according to the CME Group’s FedWatch Tool.
The revival in the hawkish Fed expectations has been due to the recent hot US inflation data, further endorsed by a bigger-than-expected increase in the US Employment Cost Index (ECI) for the first quarter of this year. Data published by the US Labor Department’s Bureau of Labor Statistics (BLS) on Tuesday showed that the ECI, the broadest measure of labor costs, increased by 1.2% last quarter after rising by 0.9% in the fourth quarter.
Strong ECI data fuelled a big rally in the US Treasury bond yields, driving the US Dollar sharply higher across the board. The Gold price correction, therefore, gathered pace, with rates hitting the lowest level in four weeks.
Looking ahead, the Fed verdict is likely to steal the show. Before that, Gold traders will also pay close attention to the US ADP Employment Change and JOLTs Job Openings data for fresh trading impetus in the run-up to the Fed event.
So far this Wednesday’s trading, the US Dollar is gaining further ground on increased expectations that the Fed will hint at a ‘higher for longer’ interest-rate view. Wall Street Journal’s (WSJ) Fed insider, Nick Timiraos, said in his story published on Tuesday that “firmer-than-anticipated inflation in the first three months of the year has likely postponed rate cuts for the foreseeable future.”
“Officials are likely to emphasize that they are prepared to hold rates steady … for longer than they previously anticipated,” Timiraos added.
Gold price technical analysis: Daily chart
As observed on the daily chart, Gold price closed Tuesday below the key 21-day Simple Moving Average (SMA) at $2,338 and the rising trendline support, then at $2,330.
The 14-day Relative Strength Index (RSI) is now sitting beneath the 50 level, having pierced through the latter for the downside on Tuesday.
The downside break of the key daily support line and the bearish RSI indicator suggest that the path of least resistance for Gold price appears down.
The immediate support is seen at the psychological $2,250 level, below which the 50-day SMA at $2,223 will be challenged.
On the flip side, acceptance above the key confluence zone of $2,338 is critical to initiating any meaningful recovery in Gold price.
The next relevant topside barriers are seen at the $2,350 mark. followed by the $2,370 round level.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling 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 Gold price, 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 fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Gold price licks wounds near four-week lows ahead of US jobs data, Fed decision.
US Dollar rebounded with US Treasury bond yields on Tuesday, as risk-off flows underpinned.
Further downside looks likely for Gold price amid bearish RSI on the daily chart.
Gold price is catching a breather early Wednesday, having hit a four-week low at $2,285 on Tuesday. Traders refrain from placing fresh directional bets on Gold price, anticipating the all-important US Federal Reserve (Fed) interest rate decision due later in the day.
Gold price looks vulnerable, as the Fed verdict looms
The Fed is widely expected to hold the Fed Funds Rate steady in the range of 5.25% to 5.5% at its May policy meeting. However, the path forward on the interest rates is likely to be laid out in the policy statement and Fed Chair Jerome Powell’s press conference will set the tone for Gold markets in the coming weeks.
Markets are pricing in the first Fed rate cut in September but the chances of that have been slashed to about 47% from over 60% seen a week ago, according to the CME Group’s FedWatch Tool.
The revival in the hawkish Fed expectations has been due to the recent hot US inflation data, further endorsed by a bigger-than-expected increase in the US Employment Cost Index (ECI) for the first quarter of this year. Data published by the US Labor Department’s Bureau of Labor Statistics (BLS) on Tuesday showed that the ECI, the broadest measure of labor costs, increased by 1.2% last quarter after rising by 0.9% in the fourth quarter.
Strong ECI data fuelled a big rally in the US Treasury bond yields, driving the US Dollar sharply higher across the board. The Gold price correction, therefore, gathered pace, with rates hitting the lowest level in four weeks.
Looking ahead, the Fed verdict is likely to steal the show. Before that, Gold traders will also pay close attention to the US ADP Employment Change and JOLTs Job Openings data for fresh trading impetus in the run-up to the Fed event.
So far this Wednesday’s trading, the US Dollar is gaining further ground on increased expectations that the Fed will hint at a ‘higher for longer’ interest-rate view. Wall Street Journal’s (WSJ) Fed insider, Nick Timiraos, said in his story published on Tuesday that “firmer-than-anticipated inflation in the first three months of the year has likely postponed rate cuts for the foreseeable future.”
“Officials are likely to emphasize that they are prepared to hold rates steady … for longer than they previously anticipated,” Timiraos added.
Gold price technical analysis: Daily chart
As observed on the daily chart, Gold price closed Tuesday below the key 21-day Simple Moving Average (SMA) at $2,338 and the rising trendline support, then at $2,330.
The 14-day Relative Strength Index (RSI) is now sitting beneath the 50 level, having pierced through the latter for the downside on Tuesday.
The downside break of the key daily support line and the bearish RSI indicator suggest that the path of least resistance for Gold price appears down.
The immediate support is seen at the psychological $2,250 level, below which the 50-day SMA at $2,223 will be challenged.
On the flip side, acceptance above the key confluence zone of $2,338 is critical to initiating any meaningful recovery in Gold price.
The next relevant topside barriers are seen at the $2,350 mark. followed by the $2,370 round level.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling 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 Gold price, 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 fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Consumer Confidence in the US fell for a third consecutive month in April.
Market players fear the Federal Reserve will maintain a hawkish stance.
XAU/USD is technically bearish and could extend its slide towards $2,260.30.
Spot Gold is under strong selling pressure on Tuesday, breaking through the $2,300 mark in the American session. XAU/USD eased throughout the day, accelerating its slump mid-European session amid a souring market mood. The slide accelerated after the release of the United States (US) t Q1 Employment Cost Index, which rose to 1.2% from the previous 0.9%, a sign of continued inflationary pressures. Furthermore, the Conference Board (CB) Consumer Confidence Index deteriorated for the third consecutive month in April, falling to 97.0 from a downwardly revised 103.1 in March.
The news exacerbated the dismal mood ahead of the Federal Reserve (Fed) monetary policy announcement sheduled for Wednesday. The central bank is widely anticipated to keep rates unchanged amid signs of continued inflationary pressures. The central bank is also expected to repeat rates, which will remain higher for longer and, overall, deliver a hawkish message.
Meanwhile, dismal US macroeconomic data spurred risk aversion, sending stocks into a selling spiral. Wall Street is closing April with sharp losses amid concerns about local growth and despite generally upbeat earnings reports in the current seasion.
XAU/USD short-term technical outlook
XAU/USD is technically bearish and seems poised to extend its slump after breaking below $2,326.50, a critical Fibonacci level, the 23.6% retracement of the $1,996.06/$2,431.43 rally. Technical readings in the daily chart favor another leg, south, as the Momentum indicator heads firmly south below its 100 line, as the Relative Strength Index (RSI) indicator turned lower almost vertically, currently piercing its midline. At the same time, the 20 Simple Moving Average (SMA) lost its bullish strength, now a few cents above the aforementioned Fibonacci resistance.
In the near term, and according to the 4-hour chart, the bearish case is more evident. XAU/USD slid below its 20 and 100 SMAs, with the shorter one gaining downward traction. Technical indicators, in the meantime, flirt with oversold readings with firm downward slopes in line with another leg south. The pair bottomed at $2,291.26 on April 23, the immediate support level, with a stronger one at $2,260.30, the 38.2% retracement of the aforementioned daily run.
Support levels: 2,291.20 2,276.50 2,260.30
Resistance levels: 2,310.50 2,326.50 2,341.05
XAU/USD Current price: $2,295.35
Consumer Confidence in the US fell for a third consecutive month in April.
Market players fear the Federal Reserve will maintain a hawkish stance.
XAU/USD is technically bearish and could extend its slide towards $2,260.30.
Spot Gold is under strong selling pressure on Tuesday, breaking through the $2,300 mark in the American session. XAU/USD eased throughout the day, accelerating its slump mid-European session amid a souring market mood. The slide accelerated after the release of the United States (US) t Q1 Employment Cost Index, which rose to 1.2% from the previous 0.9%, a sign of continued inflationary pressures. Furthermore, the Conference Board (CB) Consumer Confidence Index deteriorated for the third consecutive month in April, falling to 97.0 from a downwardly revised 103.1 in March.
The news exacerbated the dismal mood ahead of the Federal Reserve (Fed) monetary policy announcement sheduled for Wednesday. The central bank is widely anticipated to keep rates unchanged amid signs of continued inflationary pressures. The central bank is also expected to repeat rates, which will remain higher for longer and, overall, deliver a hawkish message.
Meanwhile, dismal US macroeconomic data spurred risk aversion, sending stocks into a selling spiral. Wall Street is closing April with sharp losses amid concerns about local growth and despite generally upbeat earnings reports in the current seasion.
XAU/USD short-term technical outlook
XAU/USD is technically bearish and seems poised to extend its slump after breaking below $2,326.50, a critical Fibonacci level, the 23.6% retracement of the $1,996.06/$2,431.43 rally. Technical readings in the daily chart favor another leg, south, as the Momentum indicator heads firmly south below its 100 line, as the Relative Strength Index (RSI) indicator turned lower almost vertically, currently piercing its midline. At the same time, the 20 Simple Moving Average (SMA) lost its bullish strength, now a few cents above the aforementioned Fibonacci resistance.
In the near term, and according to the 4-hour chart, the bearish case is more evident. XAU/USD slid below its 20 and 100 SMAs, with the shorter one gaining downward traction. Technical indicators, in the meantime, flirt with oversold readings with firm downward slopes in line with another leg south. The pair bottomed at $2,291.26 on April 23, the immediate support level, with a stronger one at $2,260.30, the 38.2% retracement of the aforementioned daily run.
On Monday natural gas ended the session at its highest daily closing price in 59 days. Along with today’s new recent high, it looks like it is telegraphing higher prices. If it continues to rise, and there is a good chance it will, the next higher ABCD pattern target is up at 2.20. That price is within a target zone from around 2.17 to 2.24 and it includes the 38.2% Fibonacci retracement at 2.24.
Further up is the price area around the 200-Day MA at 2.48. Notice that the moving averages are showing improving demand. Recently, the purple 8-Day MA crossed up through the orange 50-Day MA after being below it for some months. Further, the relative strength index momentum oscillator (RSI) recently broke a trendline to the upside.
Below 1.91, Likely Leads to Test of Support Lower Down
Ideally for the bulls, natural gas stays above the April 26 gap day low support price of 1.91 during retracements. If so, the above bullish case becomes more likely and may occur faster than otherwise. However, if the 1.91 price level fails to act again as support and is broken to the downside, a test of lower price levels becomes likely. Lower meaning, from 1.90 to the 1.61 closing price from the day before the gap. The April 23 high of 1.85 and the 20-Day and 50-Day MAs from 1.80 to 1.78 are two price areas that stand out.
For a look at all of today’s economic events, check out our economic calendar.
The silver market, tracked as XAG/USD, reversed its recent upward trend and settled at an intra-day low of $26.7425. This downturn reflects a stronger U.S. dollar buoyed by fading expectations for an imminent Federal Reserve rate cut and a generally improved global risk appetite.
U.S. Dollar Strength Undermines Silver Prices
A key factor contributing to the depreciation in silver’s price is the resurgence in the U.S. dollar’s value.
Additionally, the easing of geopolitical tensions, particularly in the Middle East, has diminished the demand for silver as a safe-haven asset, exerting further downward pressure on its price.
Market Anticipation of Central Bank Decisions and Economic Indicators
Investors are currently adopting a cautious stance, avoiding significant positions ahead of key economic indicators and central bank decisions that could dictate market directions. The forthcoming Federal Open Market Committee (FOMC) meeting and the U.S.
Impact of U.S. Economic Data on Monetary Policy Expectations
The anticipation of continued robust U.S. economic performance has led to a recalibration of expectations regarding the Federal Reserve’s monetary policy.
The release of the U.S. Personal Consumption Expenditures (PCE) Price Index, with a monthly increase of 0.3% and a year-over-year rise to 2.7%, supports a narrative of delayed rate cuts, possibly extending to September.
This strengthens the dollar and reduces the attractiveness of silver as an investment hedge against inflation.
Global Risk Sentiment and Investment Shifts
Improving global risk sentiment, spurred by reduced concerns over Middle Eastern conflicts and positive developments in peace negotiations, encourages investment shifts towards higher-risk assets. This transition naturally decreases the market demand for traditional safe havens like silver.
Technical Outlook on Silver Prices
Currently, silver is trading at $26.9435, reflecting a 0.98% decrease. The metal is trading below its pivotal level of $27.64, which indicates a bearish outlook for the day.
Resistance levels at $28.79, $29.57, and $30.33 might restrict upward movements, while support at $26.52, followed by more robust floors at $25.68 and $24.72, provide potential stopping points for further declines.
The positioning relative to the 50-Day and 200-Day Exponential Moving Averages at $27.49 and $26.61 respectively highlights key zones of resistance and support that are critical for future price movements.
This analysis suggests a bearish trend in the short term, contingent on silver’s ability to breach the $27.64 threshold, which would signal a possible shift in market sentiment towards a more bullish outlook.
The focus is on the Federal Open Market Committee’s decision due this Wednesday, where a hawkish shift is expected in response to recent inflation trends. Swaps traders have adjusted their expectations, now foreseeing a maximum of two rate cuts by year-end, the fewest since November 2023, according to Bloomberg. Higher interest rates generally dampen gold’s attractiveness since it yields no interest.
Strong Demand and Geopolitical Tensions
Gold’s year-to-date surge of over 12% is supported by robust demand from Asian markets, particularly China, and ongoing geopolitical tensions in regions like Ukraine and the Middle East. The World Gold Council reported a record start to the year in central bank gold purchases. Moreover, a weakening US dollar, partly due to speculation around Japanese intervention in currency markets, has also bolstered gold prices.
Market Outlook and Influences
While geopolitical instability and central bank demand have been key drivers of gold’s recent gains, the focus has shifted towards macroeconomic indicators and central bank policies. The upcoming U.S. non-farm payrolls data and Federal Reserve’s policy direction will be critical in shaping market expectations. Despite the current pullback, analysts from ANZ maintain a positive outlook on gold, anticipating a potential rise to $2,500 after a healthy correction.
Short-Term Forecast
The Federal Reserve’s anticipated hawkish pivot could significantly influence the financial terrain, particularly affecting interest rates and the value of the U.S. dollar. A hawkish stance generally leads to higher interest rates, which could boost the dollar as yields become more attractive relative to other currencies. This strengthening of the dollar typically exerts downward pressure on gold prices, as it becomes more expensive in other currencies, reducing demand.
However, the long-term outlook for gold remains fundamentally bullish. Despite potential short-term declines due to a stronger dollar and higher rates, the ongoing geopolitical risks and sustained demand, especially from central banks and Asian markets, provide strong support for gold prices. Additionally, if the escalation of geopolitical tensions continues, it could revive gold’s appeal as a safe-haven asset, counterbalancing the impact of a stronger dollar.
In summary, while the Fed’s hawkish actions could temper gold’s rise temporarily, the enduring demand and macroeconomic uncertainties suggest that gold’s price path is likely to ascend once these immediate pressures abate.
Silver price tumbles to $26.70 as US yields rise ahead of Fed policy.
The Fed is expected to keep interest rates steady with hawkish guidance.
Investors should be prepared for high volatility this week, as the US NFP will follow the Fed’s policy.
Silver price (XAG/USD) drops to near three-week low of $26.70 in Tuesday’s European session. The white metal faces a sharp sell-off after breaking below the crucial support of $27.00. The asset faces pressure as the US Treasury yields rise amid caution ahead of the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.
10-year US Treasury yields rise to 4.63% on expectations that the Fed will maintain a hawkish narrative. Higher yields on interest-bearing assets increase the opportunity cost of holding investments in non-yielding assets, such as Silver.
The CME FedWatch tool shows that interest rates will remain unchanged in the range of 5.25%-5.50%. Therefore, investors will keenly focus on the Fed’s guidance on interest rates. The Fed is expected to support keeping interest rates at restrictive levels for a longer period until it gets evidence that inflation will come down to the 2% target.
Investors will also watch whether the Fed remains committed to its three rate-cut projections this year. Doubts over the Fed’s three rate-cut projections that were shown in March’s dot plot have emerged due to United States inflation remaining stubbornly higher in the first quarter.
The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, bounces back to 105.90. The US dollar’s appeal improves ahead of a data-packed week. This week, investors will focus on the ISM Manufacturing PMI and the Nonfarm Payrolls (NFP) report for April, which will be published on Wednesday and Friday, respectively.
Silver technical analysis
Silver price declines toward the horizontal support plotted from 14 April 2023 high around $26.09 on a daily timeframe. The above-mentioned support was earlier a major resistance for the Silver price bulls. The uncertainty over Silver’s near-term outlook deepens as it has slipped below the 20-period Exponential Moving Average (EMA), which trades around $27.20.
The 14-period Relative Strength Index (RSI) slips into the 40.00-60.00, suggesting that the bullish momentum has faded. However, the long-term outlook is still stable.
Gold price drops but downside appears limited ahead of US jobs data, Fed decision.
US Dollar rebounds in sync with USD/JPY amid sluggish US Treasury bond yields.
Gold price teases downside break of the key daily trendline support at $2,330.
Gold price is looking to build on to the previous downside early Tuesday, as traders continue to take profits off the table in the lead-up to the US Federal Reserve (Fed) interest rate decision due on Wednesday.
Gold price stays weak, awaiting key US events
Besides, a cautiously optimistic market mood and a broad US Dollar (USD) rebound exert downward pressure on Gold price, as markets digest reports of a probable truce talks. Citing an Israeli source familiar with the negotiations and a foreign diplomatic source, CNN News reported on Tuesday that Hamas is considering a new framework proposed by Egypt that calls for the group to release as many as 33 hostages kidnapped from Israel in exchange for a pause in hostilities in Gaza. Receding geopolitical tensions dent the appeal of Gold, as a safe-haven asset.
Meanwhile, the US Dollar stages a comeback after two back-to-back days of losses, tracking the recovery in the USD/JPY pair after it was thrashed nearly 500 pips on Monday, in the face of a suspected intervention by the Japanese authorities to rescue the Yen from its lowest level in 38 years against the Greenback.
Gold price also bears the brunt of increased expectations that the Fed will stick to its recent hawkish rhetoric when it announces its policy decision on Wednesday, especially after hotter-than-expected US Core Personal Consumption Expenditures (PCE) Price Index inflation data.
On Friday, the annual Core PCE Price Index, the Fed’s preferred inflation gauge, rose 2.8%, at the same pace as seen in February but came in hotter than the expected 2.6% increase. Markets are pricing in the first Fed rate cut in September, with just over 30 basis points worth of easing expected this year, down from 40 bps projected a week ago.
However, the downside in Gold price appears cushioned following encouraging China’s Manufacturing PMI data for April. China is the world’s top Gold consumer and improving economic activity in the country, helps underpin the demand for the bright metal.
Next of note for Gold traders remain the US ADP Employment Change, JOLTs Job Openings data and the Fed policy announcements due on Wednesday. Meanwhile, Gold price will stay at the mercy of the broader risk sentiment and the US Dollar price action.
Gold price technical analysis: Daily chart
As observed on the daily chart, Gold price closed Monday below the key 21-day Simple Moving Average (SMA), then at $2,336.
The bright metal is once again challenging the rising trendline support at $2,330 on the extended weakness early Tuesday.
If Gold sellers manage to find a strong foothold below the latter on a daily closing basis, a fresh downtrend could be initiated toward the 50-day SMA at $2,212.
Ahead of that, the previous week’s low of $2,291 and the psychological $2,250 level could lend support to buyers.
The 14-day Relative Strength Index (RSI) looks down but holds above the midline, suggesting that the bearish potential in Gold price could be limited.
On the upside, the previous week’s high will be the initial contention point on recapturing the 21-day SMA support-turned-resistance. Further up, the $2,370 round level will be challenged en route to the April 22 high of $2,392.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling 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 Gold price, 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 fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
The first upside target is close by at 2.07. If hit, it will complete an initial target for a rising ABCD pattern that is identifying price symmetry between the AB and CD legs of the advance. However, since it is close to the top of a symmetrical triangle higher prices remain on the radar. The second target from the ABCD pattern is 2.20. That target completes an ABCD pattern where the CD leg is extended by 127.2% of the AB portion of the advance.
It begins with a target range from 2.07 to the prior December 13 swing low at 2.24. Inside that price range is the completion of a 38.2% Fibonacci retracement at 2.24. Generally, a 38.2% retracement is usually the more common minimum retracement that might be seen. This means that since natural gas is showing improving strength, the 38.2% retracement should eventually be reached, at a minimum.
Signs of Strength
Last Friday natural gas rose above the lower dashed blue channel line before ending the day below it. Today, it is on track to close above it for the first time. The lower line is parallel to the top falling dashed blue line that connects the October and January swing highs. Further, natural gas is set to end on Monday at its highest daily closing price since February 5. If the top of the first target zone at 2.235 is exceeded, the next higher zone is around the 200-Day MA, currently at 2.49. It is further anchored by the 50% retracement at 2.46.
For a look at all of today’s economic events, check out our economic calendar.
