Gold prices rebounded from daily lows late in the North American session on Friday, driven by a sharp drop in US consumer sentiment and future economic outlook. Despite high US Treasury bond yields, Gold surged by more than 1% as Americans expressed pessimism about the economy through the University of Michigan survey. The XAU/USD trades at $2,369 after bouncing off daily lows of $2,343, with fears of a significant economic slowdown prompting market participants to seek safety in the golden metal and US Dollar.
Federal Reserve officials offered mixed signals on rate cuts, with Atlanta’s Fed President Raphael Bostic suggesting only one rate cut in 2024, while Fed Governor Michelle Bowman believes that policy should remain steady without rate cuts this year. Minneapolis Fed Neel Kashkari is in a “wait and see mode” about future monetary policy. The upcoming week will see the release of inflation figures, retail sales data, building permits, and Fed speeches, all of which could impact market sentiment.
Gold prices fell due to lower US Treasury yields and a stronger US Dollar, with the US 10-year Treasury note yields rising and the US Dollar Index (DXY) increasing by 0.12% to 105.32. The University of Michigan Consumer Sentiment Index plummeted from 77.2 to 67.4 in May, the lowest level in six months. Inflation expectations also rose, adding pressure on the Fed amid softer-than-expected labor market figures. Fed rate cut probabilities increased as a result of the data release.
Gold remains bullishly biased despite retracing from its all-time high of $2,431, with buyers gaining momentum and the Relative Strength Index (RSI) turning bullish since May. Buyers pushed XAU/USD above $2,352 but struggled to breach $2,400. Further gains could see the metal reaching $2,417 and $2,431, while a slide below $2,300 could lead to a test of the 50-day Simple Moving Average (SMA) at $2,249.
Gold has a long history as a store of value and medium of exchange, serving as a safe-haven asset during turbulent times. Central banks are major Gold holders, increasing their reserves to improve the perceived strength of their economies and currencies. Gold has an inverse correlation with the US Dollar and US Treasuries, making it a popular choice to diversify assets. The precious metal’s price can be influenced by various factors, including geopolitical instability, interest rates, and the performance of the US Dollar.
In conclusion, Gold prices rebounded on Friday despite high US Treasury yields, driven by a decline in US consumer sentiment and future economic outlook. Federal Reserve officials offered conflicting views on rate cuts, with upcoming data releases likely to impact market sentiment. Gold remains bullishly biased, with buyers gaining momentum, while central banks continue to increase their Gold reserves. As a safe-haven asset, Gold’s price can be influenced by various factors, making it a popular choice for investors seeking stability during uncertain times.
