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Gold price struggles to capitalize on the overnight bounce from multi-week low

November 10, 2023| Forex Market


  • Gold price is seen consolidating in a range during the Asian session on Friday.
  • Reviving bets for one more Fed rate hike underpin the USD and cap the metal’s upside.
  • Receding safe-haven demand might contribute to keeping a lid on the non-yielding asset while China’s economic woes may mitigate its losses.

Gold price (XAU/USD) struggles to capitalize on the previous day’s goodish bounce from the $1,944 area, or over a three-week low and oscillates in a narrow range during the Asian session on Friday. Currently trading above the $1,955 level, the precious metal remains on track for its worst week in more than a month in the wake of the recent US Dollar (USD) recovery from its lowest level since September 20 touched on Monday.

The recent hawkish remarks by a slew of influential FOMC members, including Federal Reserve (Fed) Chair Jerome Powell on Thursday, reiterated the need for higher interest rates to combat stubbornly high inflation. This, in turn, allows the yield on the benchmark 10-year US government bond to move away from its lowest in more than a month, which continues to underpin the USD and acts as a headwind for the non-yielding Gold price.

Apart from this, easing concerns over the Israel-Hamas conflict further erodes demand for the safe-haven XAU/USD, though worries about the worsening economic conditions in China could help limit the downside. Moving ahead, the release of the Michigan US Consumer Sentiment Index might influence the USD price dynamics later during the North American session and produce short-term trading opportunities around the Gold price.

Daily Digest Market Movers: Gold price fails to build on the overnight bounce from a multi-week low amid hawkish Fed expectations

  • Gold price posted modest recovery gains on Thursday and snapped a three-day losing streak to its lowest level since October 18, though it is lacking any follow-through buying.
  • Federal Reserve officials, including Chair Jerome Powell, backed the case for further policy tightening to rein in inflation and cap gains for the non-yielding yellow metal.
  • Atlanta Fed President Raphael Bostic and Richmond Fed President Thomas Barkin noted that the current monetary policy stance is likely sufficiently restrictive.
  • Philadelphia Fed president Patrick Harker said on Thursday that interest rates should stay higher for longer and that the fight against inflation is still not over yet.
  • St. Louis Fed interim President Kathleen O’Neill Paese said that it was too soon to rule out further interest rate hikes and declare a victory on inflation.
  • Powell said that policymakers are not yet confident that rates are high enough to bring inflation to the 2% target and that the Fed will not hesitate to raise rates again.
  • The White House announced on Thursday that Israel will implement four-hour pauses in Gaza operations each day to allow people to flee hostilities from two humanitarian corridors.
  • China’s economic woes continue to haunt market sentiment and should lend support to the safe-haven precious metal as traders look to the US Consumer Sentiment Index.

Technical Analysis: Gold price is more likely to attract fresh sellers and remain capped near the $1,970 level

From a technical perspective, any subsequent move is likely to confront resistance near the $1,970 level, which if cleared might trigger a short-covering rally. The Gold price might then aim to surpass an intermediate hurdle near the $1,980 region and test the $1,990-$1,992 supply zone. This is followed by the $2,000 psychological mark, above which the XAU/USD could climb back to a multi-month top, around the $2,009-2,010 area touched in October.

On the flip side, the overnight swing low, around the $1,944 area, now seems to protect the immediate downside ahead of the very important 200-day Simple Moving Average (SMA), currently pegged around the $1,935-1,934 region. This is followed by the 100-day SMA, near the $1,927-1,926 area. Some follow-through selling will suggest that the Gold price has topped out in the near term and shift the bias in favour of bearish traders.

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   0.56% 1.23% 1.01% 2.40% 1.20% 1.71% 0.47%
EUR -0.56%   0.69% 0.46% 1.85% 0.64% 1.16% -0.09%
GBP -1.25% -0.69%   -0.23% 1.17% -0.05% 0.47% -0.78%
CAD -1.03% -0.46% 0.23%   1.39% 0.18% 0.68% -0.55%
AUD -2.46% -1.88% -1.19% -1.42%   -1.23% -0.71% -1.98%
JPY -1.21% -0.64% -0.18% -0.17% 1.23%   0.50% -0.73%
NZD -1.72% -1.15% -0.45% -0.68% 0.72% -0.51%   -1.24%
CHF -0.48% 0.09% 0.77% 0.54% 1.94% 0.73% 1.24%  

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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