Gold climbs to fresh daily top amid softer risk tone, upside potential seems limited


  • Gold price attracts some haven flows on Thursday in the wake of a softer tone around the equity markets.
  • The US Dollar builds on the overnight bounce from a two-month low and should cap gains for XAU/USD.
  • Bets that the Federal Reserve will not hike interest rates further could act as a headwind for the Greenback.

Gold price (XAU/USD) catches fresh bids on Thursday and for now, seems to have stalled its retracement slide from over a one-week high, around the $1,975-1.976 area touched the previous day. A softer tone around the US equity futures turns out to be a key factor acting as a tailwind for the safe-haven precious metal heading into the European session. Apart from this, growing acceptance that the Federal Reserve (Fed) is done hiking interest rates offers additional support to the non-yielding yellow metal.

That said, the ongoing US Dollar (USD) recovery, from its lowest level since September 1 touched in the aftermath of softer US consumer inflation figures, might keep a lid on any further gains for the Gold price. The US Retail Sales fell less than expected in October, which, along with an upward revision of the previous month’s already stronger reading, led to a goodish rebound in the US Treasury bond yields. This continues to lend some support to the Greenback and warrants caution before placing bullish bets around the XAU/USD.

Daily Digest Market Movers: Gold price continues to draw some support from the cautious market mood

  • The US Producer Price Index (PPI) registered its largest decline since April 2020 and fell 0.5% in October. Moreover, data for September was also revised down to show the PPI increasing by 0.4% instead of 0.5%.
  • This comes on top of the US CPI report on Tuesday, which showed that consumer inflation was cooling faster than anticipated, and strengthened expectations that the Federal Reserve is done hiking interest rates.
  • The headline US Retail Sales fell for the first time in seven months in October, though the decline was less than expected and was accompanied by an upward revision of the September data to show strong gains.
  • San Francisco Fed President Mary Daly, in an interview with Financial Times on Wednesday, underscored the uncertainty about whether the central bank has done enough to push consumer price back down to its 2% target.
  • This clouded the outlook for when the Fed will begin cutting interest rates, which is seen offering some support to the US Dollar and should contribute to keeping a lid on any meaningful appreciating move for the Gold price.
  • Market participants now look forward to the US economic docket, featuring the release of Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Industrial Production figures for a fresh impetus.
  • Apart from this, speeches by influential Fed officials will be scrutinized for cues about the near-term policy outlook and further contribute to producing short-term trading opportunities around the XAU/USD. 

Technical Analysis: Gold price might stuggle to capitalize on its modest intraday positive move

From a technical perspective, the one-week high, around the $1,975-1,976 area touched on Wednesday now seems to act as an immediate hurdle. A sustained strength beyond has the potential to lift the Gold price further towards the $1,991-1,992 hurdle en route to the $2,000 psychological mark. The momentum could get extended towards a multi-month peak, around the $2,009-2,010 region, which if cleared decisively will be seen as a fresh trigger for bullish traders and pave the way for a further near-term appreciating move.

On the flip side, the $1,955-1,950 area is likely to protect the immediate downside ahead of the 200-day Simple Moving Average (SMA), currently near the $1,935 region. This is closely followed by the 100- and the 50-day SMAs confluence, around the $1,928-1,925 zone, below which the Gold price could turn vulnerable and accelerate the fall towards the $1,900 round figure.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Japanese Yen.

USD   0.18% 0.25% 0.20% 0.68% 0.04% 0.81% 0.15%
EUR -0.18%   0.06% 0.01% 0.50% -0.14% 0.63% -0.04%
GBP -0.25% -0.06%   -0.04% 0.45% -0.20% 0.58% -0.10%
CAD -0.19% 0.02% 0.04%   0.47% -0.14% 0.62% -0.04%
AUD -0.68% -0.51% -0.44% -0.48%   -0.65% 0.13% -0.55%
JPY -0.03% 0.13% 0.19% 0.17% 0.65%   0.78% 0.10%
NZD -0.81% -0.63% -0.57% -0.60% -0.14% -0.78%   -0.67%
CHF -0.15% 0.05% 0.11% 0.07% 0.56% -0.11% 0.67%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Risk sentiment FAQs

In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

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