Gold stages modest intraday recovery, refreshes daily top amid cautious market mood


  • Gold price turns positive for the second successive day, though the upside potential seems limited. 
  • Geopolitical risks, China’s economic woes and a softer risk tone benefit the safe-haven commodity.
  • Elevated US bond yields act as a tailwind for the USD and might cap the non-yielding yellow metal. 
  • Traders might also prefer to wait on the sidelines ahead of the key US CPI report, due on Thursday.

Gold price (XAU/USD) attracts some dip-buying near the $2,024-2,023 area during the early European session on Wednesday and is now trading with a positive bias for the second straight day. Against the backdrop of geopolitical risks stemming from the Israel-Hamas war and worries over a slow economic recovery in China, reduced beets for an early interest rate cut by the Federal Reserve (Fed) weigh on investors’ sentiment. This is evident from a weaker tone around the equity markets and lends some support to the safe-haven precious metal.

That said, diminishing odds for a more aggressive Fed policy easing in 2024, in the wake of a still-resilient economy, might hold back bulls from placing aggressive bets around the non-yielding yellow metal. Furthermore, the US Dollar (USD) trades just below a multi-week high touched last Friday and remains well supported by elevated US Treasury bond yields. This might further contribute to capping the US Dollar-denominated commodity as traders keenly await the US consumer inflation figures for cues about the Fed’s rate-cut path. 

Daily Digest Market Movers: Gold price attracts some buyers amid a softer risk tone, lacks bullish conviction

  • The uncertainty over the timing of when the Federal Reserve will start cutting interest rates holds back traders from placing fresh directional bets around the Gold price.
  • The New York Fed reported on Monday that US consumers’ projection of inflation fell to the lowest level in nearly three years in December, lifting bets for an imminent shift in the Fed’s policy stance
  • Meanwhile, the resilient US economy, which is experiencing above-target inflation, gives the US central bank more headroom to keep interest rates higher for longer.
  • This allows the yield in the benchmark 10-year US government bond to hold above the 4.0% threshold, which lends support to the US Dollar and caps the yellow metal.
  • Bearish traders, however, seem reluctant and prefer to wait on the sidelines ahead of the latest US consumer inflation figures, due for release on Thursday.
  • Citing a senior US Defense Department official, CNBC reported late Tuesday that Iran-backed Houthi militants launched the largest attack to date on commercial merchant vessels.
  • A senior People’s Bank of China official said this Wednesday that the central bank may use monetary policy tools to provide strong support for reasonable credit growth.
  • The official added that the PBoC will strengthen its counter-cyclical and cross-cycle policy adjustments to create favourable conditions for the country’s economic growth.
  • There isn’t any relevant market-moving macro data scheduled for release from the US on Wednesday, leaving the XAU/USD at the mercy of the USD price dynamics.

Technical Analysis: Gold price might struggle to capitalize on modest bounce, bearish potential seems intact

From a technical perspective, the multi-week low, around the $2,017 area touched on Monday, which now coincides with the 50-day Simple Moving Average (SMA), should protect the immediate downside. A convincing break below could make the Gold price vulnerable to accelerate the slide towards the $2,000 psychological mark. Some follow-through selling will expose the December swing low, around the $1,973 region, before the XAU/USD eventually drops to the $1,965-1,963 confluence, comprising the 100- and 200-day SMAs.

On the flip side, the $2,040-2,042 zone might continue to act as an immediate strong barrier, above which the Gold price could aim to retest Friday’s swing high, around the $2,064 area. The next relevant hurdle is pegged near the $2,077 area, which if cleared decisively will negate any near-term negative outlook and set the stage for a move towards reclaiming the $2,100 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 strongest against the .

USD   0.00% 0.09% -0.06% -0.28% 0.26% -0.05% -0.02%
EUR 0.00%   0.09% -0.06% -0.27% 0.26% -0.06% 0.00%
GBP -0.09% -0.09%   -0.15% -0.36% 0.17% -0.15% -0.09%
CAD 0.05% 0.06% 0.13%   -0.21% 0.32% 0.00% 0.06%
AUD 0.26% 0.26% 0.35% 0.20%   0.51% 0.20% 0.24%
JPY -0.26% -0.25% -0.17% -0.33% -0.53%   -0.33% -0.26%
NZD 0.06% 0.06% 0.15% 0.00% -0.21% 0.31%   0.04%
CHF 0.00% 0.01% 0.10% -0.04% -0.24% 0.27% -0.04%  

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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