- Gold edges higher by 0.23% on Friday, although it is poised for a weekly decline of over 3%.
- US Durable Goods Orders surpass predictions, although the impact was mitigated by the downward revision of March’s data.
- XAU/USD bounces back as a result of contrasting US data that puts pressure on the US Dollar.
- Traders are currently expecting a modest 25 basis points of rate cuts from the Fed in 2024, which has decreased expectations for monetary easing.
The price of Gold remained steady on Friday following two consecutive days of declines, rising by approximately 0.23%. However, it decreased by over 3% throughout the week, marking the most significant weekly drop since December 2023. The US Durable Goods Orders data exceeded expectations, but a downward adjustment to the previous month’s reading reduced the significance of the report, providing an opportunity for Gold buyers.
The XAU/USD is currently trading at $2,332, having rebounded from a daily low of $2,325.
Gold traders had entered the market prior to the weekend. On Thursday, the latest US economic data revealed a positive uptick in business activity, which has subsequently reduced the likelihood of the Federal Reserve (Fed) implementing rate cuts. Currently, the estimation from Fed funds rate futures suggests a mere 25 basis points of interest rate reductions in 2024.
The data released on Friday could have done more to boost investors’ confidence in the possibility of the Federal Reserve implementing more relaxed policies. The US Department of Commerce released a solid Durable Goods Orders report for April, but the Greenback was impacted by the downward revision of March’s data. In addition to the decline in US Treasury yields, Gold’s rebound was supported, following its previous low.
Meanwhile, the University of Michigan’s (UoM) latest survey on consumer sentiment indicated a slight improvement, although there were mixed opinions on inflation expectations.
The yield on the US 10-year Treasury note stands at 4.461% and has decreased by one-and-a-half basis points, which is putting pressure on the value of the US dollar. The US Dollar Index (DXY), which monitors the dollar’s performance against a range of other currencies, is currently at 104.70, experiencing a decrease of 0.33%.
As the Value of the Dollar Continues to Decline, the Price of Gold Continues to Rise
- The decrease in US Treasury yields supports the rise in gold prices, a weaker US Dollar and a positive shift in risk sentiment as Wall Street makes a partial recovery.
- In April, the US Durable Goods Orders experienced a 0.7% month-on-month increase, which exceeded the estimated contraction of -0.8%. However, it was still lower than the revised figures of 0.8% for March.
- In May, the University of Michigan Consumer Sentiment Index recorded a reading of 69.1, which was lower than April’s 77.2 but exceeded the predicted value of 67.5. The anticipated rate of inflation for the next year experienced a slight increase, moving from 3.2% to 3.3%. However, the expectations for inflation over the next five years remained steady at 3%.
- S&P Global has published the latest US PMI data for May. The Manufacturing PMI increased to 50.9, exceeding expectations and surpassing April’s reading of 50.0. The Services PMI greatly exceeded expectations and rose to 54.8, surpassing both forecasts and April’s figure of 51.3.
- The FOMC Minutes revealed that members of the Federal Reserve were still unsure about the level of restrictiveness in their policies. They mentioned that it would require more time than initially expected to develop a stronger belief in inflation consistently reaching 2%.
- Gold prices were supported by purchases made by central banks in emerging markets, as reported in an article from The Wall Street Journal. The trigger that ignited the purchasing was the imposition of Western sanctions on Russia following its incursion into Ukraine.
- According to the World Gold Council, central banks have acquired approximately 2,200 tons of Gold since Q3 2022.
The Price of Gold Remains Steady, and It Is Holding On to Its Gains Above the $2,330 Mark
Gold’s upward trend continues, even though it has pulled back towards the $2,330 level. Despite the bearish turn of the Relative Strength Index (RSI), it may exceed the 50-midline, suggesting the presence of buyers.
So, if XAU/USD surpasses the $2,350 level, it will reveal the $2,400 threshold. Buyers are aiming for the year-to-date high of $2,450 and then setting their sights on reaching the $2,500 mark, indicating potential further gains ahead.
On the other hand, if the bears maintain control, they must strive to push the XAU/USD below the low of $2,303 recorded on May 8. After being exceeded, the previous low of $2,277 on May 3 would come next.
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