Gold keeps the red as USD strength persists ahead of Powell’s address
- Gold drifts lower for the second straight day as reduced Fed rate cut bets underpin the USD.
- The cautious market mood does little to lend any support to the safe-haven precious metal.
- Traders keenly await Fed Chair Powell’s speech for rate-cut cues and a meaningful impetus.
Gold (XAU/USD) attracts some sellers for the second consecutive day and trades just above the overnight swing low during the Asian session on Friday. The US Dollar (USD) prolongs its weekly uptrend and climbs to its highest level since August 5 amid diminishing odds for a more aggressive policy easing by the Federal Reserve (Fed). This, in turn, is seen as a key factor driving flows away from the non-yielding yellow metal.
Meanwhile, traders are still pricing in a greater chance that the US central bank will resume its rate-cutting cycle in September. This, however, does little to dent the USD bullish sentiment. Moreover, the cautious market mood fails to revive demand for the safe-haven Gold. This suggests that the path of least resistance for the XAU/USD pair is to the downside as traders await Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium.
Daily Digest Market Movers: Gold price struggles to lure buyers as reduced Fed rate cut bets underpin USD
- Traders pared their bets for a more aggressive policy easing by the US Federal Reserve following last week’s release of the hot US Producer Price Index (PPI), which pointed to signs of a gain of momentum in inflationary pressures. Moreover, Kansas City Fed president Jeffrey Schmid said on Thursday, described the central bank’s current monetary policy stance as “modestly restrictive” and sounded cautious about a September rate cut.
- Separately, Cleveland Fed President Beth Hammack said that it is important to maintain a modestly restrictive policy to lower inflation. The biggest concern is that inflation is too high and has been trending in the wrong direction, Hammack added further. This assists the US Dollar in preserving its weekly gains to the highest level since August 6 and exerts some downward pressure on the non-yielding Gold for the second straight day on Friday.
- Meanwhile, Chicago Fed President Austan Goolsbee said in a Bloomberg TV interview that the recent inflation data gives him some pause when it comes to cutting interest rates. Goolsbee, however, indicated that the September policy meeting is live for potential monetary policy action. Furthermore, Boston President Susan Collins signaled openness to a rate cut as soon as next month due to risks of weaker employment and higher tariffs.
- According to the CME Group’s FedWatch Tool, traders are pricing in a 75% chance that the Fed will lower borrowing costs in September and expect at least two 25 basis points rate cuts by the year-end. The bets were reaffirmed by Thursday’s data, which showed that Jobless Claims rose by the most in about three months, and people collecting unemployment relief in the prior week climbed to the highest level in nearly four years.
- Hence, investors will closely scrutinize Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium for fresh cues about the rate-cut path. This, in turn, will play a key role in influencing the near-term USD price dynamics and determining the next leg of a directional move for the non-yielding yellow metal.
Gold could retest 100-day SMA pivotal support once the overnight swing low, around $3,325 is broken
The overnight swing low, around the $3,325 region, now seems to protect the immediate downside ahead of the 100-day SMA, currently pegged near the $3,316-3,315 zone. Some follow-through selling below the $3,311 area, or a three-week low touched on Wednesday, will be seen as a key trigger for the XAU/USD bears. The subsequent fall could drag the Gold price below the $3,300 mark, towards the $3,270-3,265 strong horizontal support amid slightly negative oscillators on the daily chart. The latter represents the lower boundary of a three-month-old trading range, which, if broken, will suggest that the commodity has topped out and pave the way for a further depreciating move.
On the flip side, the $3,348-3,350 region now seems to have emerged as an immediate strong barrier, above which a fresh bout of a short-covering move could lift the Gold price to the $3,375 resistance zone. The momentum could extend further towards the $3,400 mark before the XAU/USD pair aims to challenge the $3,434-3,435 heavy supply zone, marking the top boundary of a three-month-old trading range.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.11% | 1.20% | 1.03% | 0.72% | 1.44% | 2.05% | 0.57% | |
| EUR | -1.11% | 0.08% | -0.10% | -0.40% | 0.32% | 0.90% | -0.52% | |
| GBP | -1.20% | -0.08% | -0.28% | -0.48% | 0.25% | 0.81% | -0.65% | |
| JPY | -1.03% | 0.10% | 0.28% | -0.28% | 0.44% | 1.05% | -0.43% | |
| CAD | -0.72% | 0.40% | 0.48% | 0.28% | 0.70% | 1.33% | -0.17% | |
| AUD | -1.44% | -0.32% | -0.25% | -0.44% | -0.70% | 0.56% | -0.86% | |
| NZD | -2.05% | -0.90% | -0.81% | -1.05% | -1.33% | -0.56% | -1.48% | |
| CHF | -0.57% | 0.52% | 0.65% | 0.43% | 0.17% | 0.86% | 1.48% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
