- Gold price hits a record high of approximately $2,170, buoyed by various positive factors.
- US Treasury yields decrease as Fed Chair Powell hints at a cautious approach towards interest rates.
- Future movements of the US Dollar and Gold will be influenced by the upcoming US NFP data release.
Gold price (XAU/USD) is on track to end the week with a third consecutive bullish performance, driven by escalating geopolitical tensions and a decrease in US Treasury yields amid speculations of a potential interest rate cut by the Federal Reserve (Fed). The precious metal surges to a new all-time high around $2,170 as the yields on 10-year US bonds drop to 4.07% following comments from Federal Reserve Chair Jerome Powell indicating the central bank’s readiness to lower rates once inflation stabilizes at the 2% target.
Powell stated during his congressional testimony: “We are waiting to become more confident that inflation is moving sustainably down to 2%. When we do get that confidence, and we’re not far from it, it will be appropriate to begin to dial back the level of restriction so that we don’t drive the economy into recession.”
The precious metal reflects strong momentum ahead of the release of US Nonfarm Payrolls (NFP) data for February, scheduled for 13:30 GMT. With robust hiring figures in January, a similar performance in February along with steady wage growth could delay any immediate rate cut decisions by the Fed. This situation would offer relief to the US Dollar, which has been experiencing significant selling pressure, potentially weighing on Gold prices. The US Dollar Index (DXY) has dropped to 102.70.
Furthermore, the recent incidents involving Iran-backed-Houthis resulting in the deaths of three civilians on a merchant ship in the Red Sea have raised concerns about geopolitical tensions in the region.
Additional Insight: Market Analysis on Gold Price and US Yields
- Gold price reaches a new peak close to $2,170 following a slightly dovish tone from Fed Chair Jerome Powell. The comments from Powell have reinforced investor expectations of potential rate cuts in the near future, with June being a likely timeline for such actions. The Fed is anticipated to maintain current interest rates in the range of 5.25%-5.5% during the March and May policy meetings.
- Today’s trading session will test the strength of the Gold price as the US NFP data for February is released. Forecasts suggest an addition of 200K jobs by US employers, a decline from January’s robust hiring figures. The Unemployment Rate is expected to hold steady at 3.7%.
- Focus will also be on the February Average Hourly Earnings data, where economists predict a moderation in monthly wage growth to 0.3% from 0.6% in January. The annual wage growth is projected to slow down slightly to 4.4% from the previous reading of 4.5%.
- Higher wage growth could impact the decline in inflation towards 2%, potentially altering market expectations for Fed rate cuts in June. In such a scenario, Gold prices may face pressure as the opportunity cost of holding non-yielding assets increases.
Technical Analysis: Gold Price Reaches Overbought Levels around $2,170
Gold price continues its winning streak for the eighth consecutive trading session, hitting new all-time highs at $2,172 after surpassing the horizontal resistance line set from the December 4 high near $2,145.
While the Gold price is in uncharted territory and expected to remain bullish, a corrective pullback may occur as momentum oscillators indicate overbought conditions. The 14-period Relative Strength Index (RSI) stands at 83.00, well above the threshold of 70.00, signaling a potential correction in the near term.
Key support levels to watch include the December 4 high near $2,145 and the December 28 high at $2,088.
