Gold prices saw a slight increase of 0.23% on Friday, but the precious metal was set to experience its largest weekly drop in percentages since December 2023, with a decline of over 3%. This decline was largely attributed to the US Durable Goods Orders data exceeding expectations, although a downward revision to the previous month’s figures softened the impact, prompting Gold buyers to enter the market. The XAU/USD pair traded at $2,332 after bouncing back from a daily low of $2,325.
Traders showed optimism as US economic data indicated an improvement in business activity on Thursday, reducing the likelihood of the Federal Reserve cutting rates. Currently, fed funds rate futures predict only a 25-basis-point interest rate cut in 2024. Despite Friday’s data showing positive Durable Goods Orders for April, the Greenback was weighed down by the downward revision of March’s figures, leading to Gold’s rebound after hitting a low.
The University of Michigan’s Consumer Sentiment Index showed a minor improvement, but inflation expectations remained mixed. The US 10-year Treasury note’s yield declined, causing the US Dollar Index to trade lower at 104.70, decreasing by 0.33%. Gold prices were further supported by a decline in US Treasury yields, a weaker US Dollar, and an improvement in risk appetite as Wall Street recovered some ground.
Central banks are significant holders of Gold, using it to diversify their reserves and increase trust in the economy and currency during turbulent times. Gold has an inverse relationship with the US Dollar and US Treasuries, making it a popular choice for investors to hedge against inflation and currency depreciation. The price of Gold can be influenced by factors such as geopolitical instability, recession fears, and changes in interest rates.
Technical analysis showed that Gold’s uptrend remained intact, with the RSI suggesting potential buyer interest. If XAU/USD surpasses $2,350, it could reach $2,400 and possibly the year-to-date high of $2,450. On the other hand, a drop below $2,303 could signal bearish momentum, aiming for the May 3 cycle low of $2,277.
In conclusion, Gold prices rose marginally on Friday but were still on track for a significant weekly drop. Positive US economic data and a weaker US Dollar contributed to the precious metal’s rebound, highlighting its role as a safe-haven asset during times of uncertainty. With central banks increasing their Gold reserves and investors seeking protection against inflation and currency devaluation, Gold is likely to remain a popular investment choice for the foreseeable future.
