Gold price (XAU/USD) rises to around $4,050 during the Asian trading hours on Monday. The precious metal edges higher amid uncertainty over the US economic outlook. Traders ramped up bets on a US rate cut following weak US private jobs data and a downbeat University of Michigan (UoM) Consumer Sentiment Index survey. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.
On the other hand, signs that the US government shutdown may end could undermine safe-haven assets such as Gold. US senators are voting on a deal on Monday that could end the longest government shutdown in history. Furthermore, easing trade tensions between the US and China, the world’s two largest economies, could also drag the yellow metal lower in the near term.
Traders will closely monitor the US October Consumer Price Index (CPI) inflation data later on Thursday. The headline CPI is expected to show an increase of 0.2% MoM in October, while the core CPI is projected to show a rise of 0.3% MoM during the same period. The US Retail Sales will be in the spotlight on Friday.
Daily Digest Market Movers: Gold gains momentum as uncertainty grows
- The US government shutdown is nearing an end after a group of centrist Senate Democrats agreed to support a deal to reopen the government and fund some departments and agencies for the next year, per Bloomberg. The measure would fund certain departments through January 30.
- China’s Ministry of Commerce said on Sunday that it would temporarily lift its ban on approving exports of “dual-use items” related to gallium, germanium, antimony, and super-hard materials to the US. The suspension takes effect from Sunday until November 27, 2026.
- The latest measure followed a similar announcement on Friday, when China suspended additional export controls imposed in October on some rare earth metals and lithium battery components.
- The University of Michigan (UoM) revealed on Friday that the Consumer Sentiment Index eased to 50.3 in November, the lowest level since June 2022, from a final reading of 53.6 in October. This figure came in weaker than the expectation of 53.2.
- Markets now see nearly a 66% possibility of a 25 basis points (bps) rate cut in December, according to the CME FedWatch tool.
Gold’s bullish bias intact above the key 100-day EMA
Gold price trades in positive territory on the day. According to the daily chart, the positive outlook of the precious metal remains in play as the price holds above the key 100-day Exponential Moving Average. The path of least resistance is to the upside, with the 14-day Relative Strength Index (RSI) standing above the midline near 55.0. This displays the bullish momentum for the yellow metal in the near term.
Sustained trading above the October 22 high of $4,161 could send the yellow metal toward the $4,200 psychological level. Further north, the next hurdle to watch is the upper boundary of the Bollinger Band at $4,325.
If we start seeing bearish candlesticks and consistent trading below $4,000, that could signal that sellers are back in control. In that case, XAU/USD might return to the lower limit of the Bollinger Band of $3,835, followed by the 100-day EMA of $3,705.
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.