News & Analyses

Gold price extends the rally despite hawkish Fedspeak

  • Gold price edges higher for the second consecutive day on Friday. 
  • Weak employment data bolstered the speculation that the weakening economy would force the Fed to cut rates.
  • The hawkish Fed talks could create bearish headwinds for gold. 

Gold price (XAU/USD) gains momentum on Friday despite the modest rebound in US Dollar (USD). The yellow metal edges higher as many economists expect a weakening labor market could prompt the Federal Reserve (Fed) to cut interest rates sooner than currently expected to stimulate economic growth. Furthermore, the renewed geopolitical concerns are likely to be a positive factor for gold’s value on the market. 

However, the hawkish US Fed talks on the interest rate, and the stronger US dollar (USD) might weigh on gold prices. Gold traders will keep an eye on the first reading of the US Michigan Consumer Sentiment Index for May, along with the speeches from the Fed’s Bowman, Goolsbee, and Barr. Next week, the US Consumer Price Index (CPI) report will be in the spotlight. 

Daily Digest Market Movers: Gold price holds positive ground amid Fed’s hawkish comments 

  • San Francisco Fed President Mary Daly said that uncertainty over the inflation outlook makes policy projections difficult until the Fed gets more clarity.
  • The US Initial Jobless Claims for the week ended May 4 rose to 231K from the previous week of 209K, higher than the market consensus of 210K. This figure registered the highest level since August 2023, signaling the labor market was cooling.
  • Coupled with April’s downbeat US Nonfarm Payrolls (NFP) of 175,000 new jobs. These reports paint a picture of a cooling US economy.
  • Israeli forces massed tanks and opened fire close to built-up areas of Rafah on Thursday after President Joe Biden said the US would withhold weapons from Israel if its forces mounted a major invasion of the southern Gaza city.
  • The rise in global gold demand was mainly driven by strong over-the-counter market investment, persistent central bank purchasing, and growing demand from Asian buyers, according to the WGC’s report.
  • The preliminary US University of Michigan Consumer Sentiment Index is expected to drop in May from 77.2 in April to 76.0.

Technical Analysis: Gold price’s uptrend remains intact

The gold price trades on a positive note on the day. The yellow metal keeps the bullish vibe unchanged as it holds above the key 100-day Exponential Moving Average (EMA) on the daily timeframe.

In the near term, XAU/USD breaks above a descending trend channel that formed in mid-April, with the 14-day Relative Strength Index (RSI) standing in bullish territory around 67.50, which supports the buyers for the time being.

If gold bulls step in at the $2,400 psychological mark, then yellow metal could see a rally to an all-time high near $2,432, en route to the $2,500 figure. On the flip side, the first downside target will emerge at the resistance-turned-support level at $2,340. Extended losses for gold price expose XAU/USD to a potential support level at the $2,300 round mark, followed by a low of May 2 at $2,281. 

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Canadian Dollar.

USD   0.08% 0.06% 0.06% 0.24% 0.22% 0.31% 0.10%
EUR -0.06%   0.00% 0.02% 0.15% 0.18% 0.25% 0.04%
GBP -0.05% 0.01%   0.01% 0.16% 0.18% 0.24% 0.04%
CAD -0.06% 0.00% 0.00%   0.16% 0.18% 0.25% 0.04%
AUD -0.24% -0.16% -0.16% -0.15%   0.01% 0.10% -0.12%
JPY -0.23% -0.18% -0.20% -0.17% -0.02%   0.06% -0.14%
NZD -0.30% -0.25% -0.24% -0.23% -0.09% -0.08%   -0.19%
CHF -0.10% -0.04% -0.05% -0.04% 0.11% 0.13% 0.20%  

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).

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.


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