Gold fell slightly during Tuesday’s trading session, as we continue to consolidate just above the $2,300 level. This market has been very strong lately, so this pullback makes sense to some extent.
Keep an eye on interest rates in the US, because obviously that will have a significant impact on the direction we go next. Of course, we have to look at this from the perspective of a market that has a lot of different factors driving it. Not only are interest rates you should pay attention to, but you also have to pay attention to geopolitical concerns. After all, the situation in the Middle East has not really improved.
And then of course, we have a war in Ukraine, and central banks all over the world, especially those in the Global South, seize as much gold as possible. So, I think you still have a bit of bottom in this market anyway. This decline that we are currently observing in this market is supposed to be a good buying opportunity. The 50-day EMA will be supported at the bottom as well.
In the global market, bullion prices fell $5 to $2,297 an ounce, reversing the domestic trend and signaling broader economic impacts.
The impact of the strength of the US dollar on gold prices
Gold (XAU/USD) fell almost a third of a percent, at $2,310 on Tuesday, as the U.S. dollar (USD) recovers, reducing the cost of gold priced in U.S. dollars.
Gold prices fall due to the strength of the dollar
Gold prices fell on Tuesday after the US dollar rebounded, which led to a decrease in the cost of the precious metal in US dollars.
Although US nonfarm payrolls data last week showed a weak labor market suggesting that the Fed may cut interest rates sooner than expected, comments from Fed members over the past few days have continued to show policymakers’ reluctance to accelerate borrowing costs.
The Fed chairman said Monday that the current interest rate level should calm the economy enough to bring inflation down to the Fed’s target of 2.0%, but that would be a “stubborn path back,” and that “doesn’t mean you won’t recover it, it just means it will take some time.”
Meanwhile, the Fed chairman stated that there will eventually be interest rate cuts and that he sees moderate job growth, but the Fed will consider the “total” data before making a decision.
Markets have priced 46 basis point rate cuts from the Fed by the end of 2024, with the first cut expected in September or November, depending on the LSEG interest rate probability applicator.
The price is likely to pull back further and fall to the base of the range at around $2280. Support from the 200 SMA and its previous lows of around $2300 could be an obstacle on the way down.
A critical breakout will be one characterized by a longer-than-average green candlestick that breaks above the roof of the range, closing near its high; or three consecutive green candles that break through the level in question.
China’s gold reserves fall amid rising prices
China’s central bank increased its gold reserves for the eighteenth consecutive month in April, despite a slowdown in the pace of buying in the face of record prices.
The People’s Bank of China has long been one of the largest buyers in the market, steadily increasing its bullion holdings since 2022. However, the precious metal’s record rally since mid-February – with all-time highs reached last month – appears to have eased demand..
In April, the People’s Bank of China bought 60,000 troy ounces, according to official data released on Tuesday. That’s down from 160,000 ounces in March and 390,000 ounces in February.
First-quarter purchases by the world’s central banks, led by China, were the strongest on record, according to the World Gold Council. Some market watchers have suggested that gold’s 12% rise this year was partly driven by “mysterious buyers” among those institutions..
Central banks tend to be strategic buyers in the long term, and bullion buying by institutions in emerging markets will take much longer, according to Goldman Sachs Group..
Central banks in emerging markets are driving the rush for gold. Bullion holdings still account for only 6% of emerging central bank reserves, half of levels in developed markets..
Gold was also supported by increased demand from Asian investors, especially in China, where appetite increased due to weak economic performance and lackluster markets. Rising geopolitical risks amid conflicts in Ukraine and the Middle East have also boosted safe haven purchases.
Spot gold fell 0.6 percent to $2,310.34 an ounce, and the Bloomberg Spot Dollar Index rose slightly. Silver, palladium and platinum prices fell.
