- Gold surges, responding to the hawkish remarks from Fed Chair Powell and the varied US data.
- Escalating tensions in the Middle East have a direct impact on Gold’s status as a safe-haven asset.
- The probability of the Federal Reserve implementing multiple interest rate reductions this year is diminished due to the prevailing market anticipations.
Gold prices ticked up towards the end of Tuesday’s North American session, increasing by 0.22% in response to a more assertive stance from Federal Reserve Chair Jerome Powell. The economic data from the United States (US) showed a combination of positive and negative results. However, the Retail Sales report on Monday and Powell’s comments helped to maintain higher US Treasury yields, which limited the progress of the yellow metal.
The XAU/USD is currently trading at $2,388, having reached a daily low of $2,363. The current situation in the Middle East has led to a decrease in risk tolerance. After Iran’s recent assault on Israel, the latter is prepared to respond despite the White House’s declaration of non-involvement.
Considering the circumstances, Gold is poised to keep moving forward, mainly due to Fed Chair Jerome Powell’s statement about the robust performance of the US economy, despite acknowledging the lack of significant progress in inflation based on recent data.
After those comments, traders adjusted their expectations for the Federal Reserve to lower rates multiple times this year, as reported by Reuters. According to the CME FedWatch Tools, there is a high likelihood of a rate cut occurring in September, with the probability of a quarter of a percentage point being 71.38%.
Gold Traders Disregard Higher Yields in the United States and Robust Production Output Data
- In March, US building permits declined 4.3%, falling to 1.458 million. This number was lower than the anticipated 1.514 million and February’s recorded figure of 1.523 million. In addition, housing starts declined 14.7%, dropping from 1.549 million to 1.321 million. This figure fell well below the predicted forecast of 1.48 million.
- The Federal Reserve announced that March’s Industrial Production remained steady, in line with expectations and matching the growth rate of 0.4% Month over month.
- In light of various economic signals, market participants continue to center their attention on the robust March US Retail Sales data that was unveiled on Monday. Of particular significance was the control group’s performance, which is crucial for GDP calculations. It surpassed both predictions and the results from the previous month.
- In spite of positive economic indicators in the US, market participants appear to be primarily concerned with geopolitical uncertainties. According to sources cited by The Jerusalem Post, Israel has apparently completed preparations for a retaliatory action against Iran.
- The price of Gold continues to stay elevated despite the fact that US Treasury yields are experiencing a rise of over five basis points (bps) in the middle and long-term sections of the yield curve.
- The US Dollar Index (DXY), which measures the strength of the dollar against a group of six other currencies, rises by 0.11% to reach 106.29, reaching levels not seen since November 2023.
- The Q1 2024 Gross Domestic Product (GDP) projections indicate a 2.9% growth for the US economy, surpassing the previous estimate of 2.8% made on April 15. These figures are based on the Atlanta GDPNow model.
Despite the Fact That the Relative Strength Index (RSI) Is at Overbought Levels, Gold Buyers Continue to Be in Control
Gold tends to move in an upward direction, although the current upward movement appears to be stretched, which raises the possibility of a decline. However, based on Dow Theory, it is more probable that the trend will persist rather than reverse.
Having experienced a decline on Friday, the Relative Strength Index (RSI) is now showing signs of a rebound as buyers have entered the market. This could lead to a test of the $2,400 level. If the level above is breached, it will reveal the record-breaking peak at $2,431, closely followed by $2,450.
Alternatively, if the daily close falls below the April 12 close of $2,343, it may pave the way for a potential decline in Gold’s price toward the $2,300 level. If it is cleared, the subsequent level of support would be the swing low of $2,267 on April 5.