Gold prices traded with a mild positive bias on Friday, supported by a weaker USD and the decline in US yields. Traders are anticipating a potential interest rate cut by the Federal Reserve this year following weaker US GDP data. Geopolitical risks in the Middle East could also boost the precious metal as a safe-haven asset. Investors are closely watching the US April PCE inflation data for further cues on gold price movement.
Recent developments in the market include Israel’s control of Gaza’s entire land border, the second estimate of US GDP growth in Q1, an increase in weekly Initial Jobless Claims, and comments from various Federal Reserve officials regarding inflation and interest rates. There are mixed opinions among Fed officials, with some signaling a possible interest rate cut in July and others suggesting no immediate action is needed.
From a technical analysis perspective, the gold price remains positive on the daily chart, with key levels to watch including the upper boundary of the Bollinger Band near $2,425 as immediate resistance and the $2,290-$2,300 region as a key support level. The 14-day Relative Strength Index indicates a lack of direction, pointing towards potential consolidation in the near term.
The US Dollar faced weakness against the Swiss Franc this week, as shown in the percentage change table against other major currencies. The Federal Reserve’s monetary policy decisions, including interest rate adjustments, play a significant role in shaping the value of the USD. Inflation and employment conditions are key factors influencing Fed decisions, with the goal of achieving price stability and full employment.
The Fed conducts eight policy meetings a year to assess economic conditions and make monetary policy decisions. QE and QT are non-standard policy measures used by the Fed in extreme situations, such as during crises or when inflation is extremely low. QE involves increasing the flow of credit in the financial system by buying bonds, while QT is the reverse process that may strengthen the value of the US Dollar.
In conclusion, gold prices are influenced by a combination of factors including geopolitical risks, economic data, Federal Reserve policies, and currency movements. Traders will continue to monitor developments in these areas to gauge the trajectory of gold prices in the near future. The current positive bias in gold price, supported by a weaker USD and lower US yields, reflects ongoing market uncertainties and the potential impact on safe-haven assets like gold.
