Gold prices, represented by XAU/USD, have retraced slightly from their recent peak of around $2,354, maintaining positive momentum during the European session. This marks the ninth day of an upward trend in the past ten days, driven by expectations of impending rate cuts by the Federal Reserve (Fed). Additionally, robust buying from the Chinese central bank has bolstered the precious metal’s rally over the past fortnight. However, amidst a generally optimistic sentiment in equity markets and easing geopolitical tensions in the Middle East, the excessive bullish conditions on the daily chart have limited further gains for gold.
Meanwhile, the US Dollar (USD) continues to find support from the encouraging US Nonfarm Payrolls (NFP) report released on Friday. The report surpassed expectations, leading investors to dial back their forecasts for aggressive policy easing by the Fed. Hawkish remarks from Dallas Fed President Lorie Logan have also contributed to the upward trajectory of US Treasury bond yields, bolstering the USD and restraining gold prices, which offer no yield.
Investors are exercising caution, awaiting further signals regarding the Fed’s rate-cutting strategy before committing to new positions. Attention is now focused on the release of US consumer inflation figures and the Federal Open Market Committee (FOMC) meeting minutes scheduled for Wednesday.
Market Highlights:
Gold prices surged to a fresh all-time high at the start of the week, propelled by China’s central bank buying spree and expectations of lower US interest rates.
China’s official data revealed a consistent increase in bullion holdings by the People’s Bank of China for the 17th consecutive month.
Market sentiment improved as Israel announced troop withdrawals from southern Gaza, signaling a willingness to engage in ceasefire talks, easing tensions in the Middle East.
The US Bureau of Labor Statistics reported better-than-expected Nonfarm Payrolls figures for March, prompting a revision in rate-cut expectations for 2024 and driving US Treasury bond yields higher.
Technical Analysis:
Despite overbought conditions signaled by the Relative Strength Index (RSI) on the daily chart, gold’s acceptance above the $2,300 level indicates potential for further upside.
A consolidation or minor pullback may precede another upward move, with support levels at $2,305-2,300 and $2,267-2,265.
A breach below the latter support could lead to technical selling, with downside targets at $2,223-2,222 and potentially $2,200, altering the short-term bias in favor of bearish sentiment.
