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Gold price slides back closer to monthly low amid some follow-through USD buying

November 7, 2023| Forex Market


  • Gold price remains under some selling pressure for the second successive day on Tuesday.
  • A modest USD strength is seen as a key factor that drags the metal closer to the monthly low.
  • Bets that the Fed is done raising rates might help limit losses amid the economic uncertainty.

Gold price (XAU/USD) drifts lower for the second successive day on Tuesday and drops back closer to the monthly low during the Asian session. The ongoing US Dollar (USD) recovery from its lowest level since September 20 touched on Monday turns out to be a key factor undermining the commodity. Furthermore, there have been no major developments in the Israel-Hamas conflict, which is further driving flows away from the safe-haven precious metal.

That said, the risk of a broadening crisis in the Middle East, along with the economic uncertainty, keeps investors on edge and might lend some support to the Gold price. Apart from this, a fresh leg down in the US Treasury bond yields, led by firming expectations that the Federal Reserve (Fed) is nearing the end of its policy tightening campaign, should limit losses for the non-yielding yellow metal. This, in turn, warrants some caution for bearish traders.

In the absence of any relevant market-moving economic releases from the US on Tuesday, the market focus will remain glued to speeches by influential FOMC members, including Fed Chair Jerome Powell’s appearance on Wednesday and Thursday. Investors will look for fresh cues about the Fed’s future rate hike path, which will play a key role in driving the USD demand in the near term and determine the next leg of a directional move for the Gold price.

Daily Digest Market Movers: Gold price is pressured by a modest USD strength

  • The uncertainty over the Federal Reserve’s next policy move prompts some short-covering around the US Dollar and exerts pressure on the Gold price.
  • The softer US jobs report released on Friday reinforces the view that the US central bank will maintain the status quo for the third straight meeting in December.
  • Fed Governor Lisa Cook said on Monday that the central bank’s current target interest rate is adequate to return inflation to the central bank’s 2% target.
  • Minneapolis Fed President Neel Kashkari noted that the US economy has proved to be very resilient and under-tightening will not get inflation back to 2% in a reasonable time.
  • Investors now look to speeches by other influential FOMC members and will closely scrutinize comments by Fed Chair Jerome Powell on Wednesday and Thursday.
  • The US Treasury bond yields struggle to capitalize on the overnight goodish rebound and turn back lower on Tuesday amid bets that the Fed is done raising rates.
  • This, along with the risk of a further escalation in the Israel-Hamas conflict and economic uncertainty, should lend support to the safe-haven precious metal.
  • China’s trade balance fell sharply from $77.71 billion to $56.53 billion in October – its worst level since May 2022 – amid an unexpected surge in imports.
  • Chinese exports fell more than expected, pointing to worsening overseas demand, especially from its biggest trade destinations – Europe and the US.

Technical Analysis: Gold price looks to monthly low, around $1,970 to offer some support

From a technical perspective, some follow-through selling below the $1,970 level will expose the next relevant support near the $1,954-1,953 area (September 24 low). The said area nears a previous strong horizontal resistance breakpoint near the $1,950-1,948 region and should act as a key pivotal point. A convincing break below might make the Gold price vulnerable to accelerate the slide towards the 200-day Simple Moving Average (SMA), currently pegged near the $1,934 area, en route to the $1,926-1,923 confluence, comprising the 100- and 50-day SMAs.

On the flip side, the $1,980 level now seems to act as an immediate hurdle ahead of the $1,991-1,992 region. The next relevant resistance is pegged near the $2,000 psychological mark and the post-NFP swing high, around the $2,004 zone. This is closely followed by the $2,009-2,010 area, or a multi-month top touched in October, which if cleared decisively will be seen as a fresh trigger for bullish traders and pave the way for additional gains.

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Swiss Franc.

USD   0.20% 0.33% 0.37% 0.86% 0.51% 0.76% 0.04%
EUR -0.21%   0.15% 0.16% 0.63% 0.30% 0.56% -0.18%
GBP -0.33% -0.13%   0.04% 0.52% 0.17% 0.43% -0.30%
CAD -0.37% -0.18% -0.04%   0.48% 0.13% 0.38% -0.34%
AUD -0.82% -0.62% -0.49% -0.45%   -0.31% -0.05% -0.78%
JPY -0.51% -0.31% -0.39% -0.11% 0.32%   0.27% -0.47%
NZD -0.77% -0.56% -0.44% -0.38% 0.07% -0.25%   -0.71%
CHF -0.04% 0.16% 0.28% 0.33% 0.81% 0.47% 0.72%  

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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