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Gold price retreats further from monthly peak, downside potential seems limited

November 22, 2023| Forex Market



  • Gold price ticks lower after the FOMC meeting minutes struck a more hawkish tone.
  • Subdued US Dollar price action could lend some support and help limit further losses.
  • Repeated failures to find acceptance above the $2,000 mark warrant caution for bulls.

Gold price (XAU/USD) extends the overnight modest pullback from the $2,007 area, or the vicinity of a multi-month peak, and remains depressed below the $2,000 psychological mark through the Asian session on Wednesday. The minutes from the Federal Reserve’s most recent policy meeting held on October 31-November 1 struck a hawkish tone and revealed that officials remain committed to tightening policy further if progress in controlling inflation falters. This, in turn, is seen as a key factor driving flows away from the non-yielding yellow metal.

Policymakers, however, said they were in no rush to raise interest rates again, reinforcing expectations that the Fed had reached an interest rate peak. Moreover, the markets are still pricing in the possibility that the Fed will start cutting rates as soon as next year’s April 30-May 1 policy meeting. This fails to assist the US Dollar (USD) to capitalize on the overnight goodish rebound from its lowest level since August 31, which should lend support to the Gold price. Hence, it will be prudent to wait for strong follow-through selling before positioning for any further decline.

Daily Digest Market Movers: Gold price is pressured by hawkish FOMC meeting minutes released on Tuesday

  • The minutes from the Federal Reserve’s latest meeting revealed officials backing higher for longer interest rates for some time to tame inflation and undermine the Gold price.
  • Market participants, however, seem convinced that the US central bank will keep rates steady rather than hiking and are pricing in the possibility of rate cuts by spring 2024.
  • The benchmark 10-year US Treasury bond yield languishes near a two-month low and fails to assist the US Dollar (USD) to register any meaningful recovery from a multi-month low.
  • The National Association of Realtors reported that US Existing Home Sales fell in October to a seasonally adjusted annual rate of 3.79 million units or the lowest level in more than 13 years.
  • Israel and Hamas have agreed to a deal for the staggered release of 50 civilians held hostage in Gaza in exchange for Palestinian prisoners and a four-day halt to hostilities.
  • The US military conducted discrete, precision strikes against two Iran-backed facilities in Iraq in response to the attacks against US and Coalition forces by Iran and Iran-backed groups.
  • The markets reacted little to the latest development as there hasn’t been any major escalation in the Middle East tensions, doing little to influence the safe-haven precious metal.
  • Traders now look to the US macro data – Initial Weekly Jobless Claims, Durable Goods Orders and revised Michigan Consumer Sentiment Index – for short-term impetus.

Technical Analysis: Gold price has been struggling to build on its momentum beyond the $2,000 psychological mark

From a technical perspective, the recent repeated failures to build on the momentum beyond the $2,000 mark warrant some caution for bullish traders. Meanwhile, oscillators on the daily chart are holding comfortably in the positive territory and are still far from being in the overbought zone. The mixed setup makes it prudent to wait for some follow-through buying beyond the $2,009-2,010 area or a multi-month peak touched in October before positioning for any further gains. The XAU/USD might then accelerate the positive move further towards the $2,022-2,023 intermediate hurdle en route to the next relevant barrier near the $2,038 region.

On the flip side, the $1,991-1,990 area now seems to protect the immediate downside ahead of the $1,978-1,976 region. Some follow-through selling will expose the weekly low, around the $1,965 level, which if broken decisively could make the Gold price vulnerable to accelerate the slide back towards challenging the 200-day Simple Moving Average (SMA), currently pegged near the $1,938-1,939 zone. This is followed by the confluence of the 100- and the 50-day SMAs, around the $1,932-1,931 region. The latter coincides with the monthly low and should act as a key pivotal point for short-term traders.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.

USD   0.02% 0.06% 0.01% 0.05% 0.04% 0.11% 0.00%
EUR -0.02%   0.03% 0.00% 0.04% 0.04% 0.09% -0.03%
GBP -0.06% -0.03%   -0.04% 0.01% -0.02% 0.06% -0.06%
CAD -0.02% 0.00% 0.03%   0.04% 0.03% 0.09% -0.02%
AUD -0.06% -0.03% 0.02% -0.03%   0.01% 0.06% -0.06%
JPY -0.04% -0.02% 0.00% -0.01% 0.03%   0.05% -0.05%
NZD -0.12% -0.09% -0.04% -0.10% -0.06% -0.07%   -0.12%
CHF 0.00% 0.02% 0.06% 0.03% 0.07% 0.05% 0.13%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

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.


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