Gold price is consolidating in a range during the Asian session on Friday. The USD’s strength, as a result of bets for further Fed rate hikes, is capping the metal’s upside. Receding safe-haven demand and China’s economic woes are also contributing to limiting the non-yielding asset’s losses. Despite posting modest recovery gains on Thursday, the Gold price lacks follow-through buying and remains on track to register its worst week in over a month due to the recent USD recovery. A more hawkish tone from influential FOMC members, along with the Federal Reserve Chair’s comments on the slowing pace of inflation, has allowed the 10-year US government bond yield to move away from a one-month low, further weighing on the Gold price.
Easing concerns over the Israel-Hamas conflict are eroding demand for the safe-haven XAU/USD, while worries about China’s worsening economic conditions could help limit the downside. Traders are now awaiting the release of the Michigan US Consumer Sentiment Index to influence the USD price dynamics and contribute to potential short-term opportunities around the Gold price.
Meanwhile, Federal Reserve officials have backed the case for further policy tightening to control inflation and cap gains for Gold. Hawkish comments from several members and market concerns regarding China’s economic woes are likely to support the safe-haven precious metal, with traders looking to the US Consumer Sentiment Index for further direction.
Technically, resistance near the $1,970 level might trigger a short-covering rally, while the $1,944 area acts as immediate support. The percentage change of the USD against major currencies this week shows its strength against the Swiss Franc.
Interest rates are influential in shaping global markets and directly impact the price of Gold. An increase in interest rates usually strengthens the USD and lowers the price of Gold, as it increases the opportunity cost of holding Gold. Expectations for future Fed funds rate and monetary policy decisions by the Federal Reserve significantly shape financial markets.
