Gold price continues to struggle to capitalize on recent gains, despite hitting a fresh record peak last week. The metal’s rally was hindered by overbought conditions and a slight uptick in the USD. However, bets for a Fed rate cut in June are acting as a headwind for the USD, which could limit losses for gold. Traders are closely monitoring the upcoming US consumer inflation figures on Tuesday, as they could influence market expectations regarding the Fed’s rate-cut path.
The recent spike in the unemployment rate in the US has fueled expectations of a rate cut by the Fed in June, pushing the gold price to new highs. The possibility of a rate cut has increased to around 30% for May, but June remains the most likely timing for any policy action by the Fed. With geopolitical tensions and concerns about the global economy weakening in 2024, investors are turning to gold as a safe-haven asset.
From a technical standpoint, the gold price has broken through previous record highs and remains bullish. However, the RSI on the daily chart suggests extreme overbought conditions, indicating a need for consolidation or a slight pullback before further upside. Key support levels to watch include Friday’s swing low around $2,154 and the $2,125 intermediate support.
Central banks, especially those from emerging economies like China, India, and Turkey, have been rapidly increasing their gold reserves. Gold is seen as a hedge against inflation, depreciating currencies, and geopolitical instability. Its inverse correlation with the US Dollar and risk assets make it an attractive investment during uncertain times. Additionally, movements in the price of gold are largely influenced by the behavior of the USD, as the metal is priced in dollars. A weaker Dollar typically boosts gold prices, while a stronger Dollar can keep prices in check.
