Johannesburg, South Africa – As global markets remain gripped by uncertainty, the gold market reveals a mixed narrative, impacted both by local demand and significant international events. On Thursday, the price of gold, represented as XAU/USD, exhibited a modest climb from its one-week low in the $1,970-1,969 (R36,495-R36,476.50) range. Despite this, it stopped short of surpassing the formidable $2,000 (R37,000) psychological barrier during the early European trading hours.
This hesitation in the gold market can be attributed to the buoyant mood in global equity markets, which traditionally act as a counterweight to gold’s safe-haven appeal. However, looking beyond the day’s trading, several macroeconomic and geopolitical factors are at play, which could significantly influence the trajectory of gold prices in the coming weeks.
From an economic standpoint, a notable decline in the US Treasury bond yields and a weakened US Dollar (USD) bolster the appeal of non-yielding gold. This decline is rooted in the market’s anticipation that the US Federal Reserve might halt its rate hikes, following its decision to keep the key overnight interest rates unchanged for two consecutive times. Furthermore, the financial landscape suggests that the US central bank could potentially slash rates by June 2024. These expectations were solidified as the yield on the two-year US government bond dipped to levels unseen since September 8, and the benchmark 10-year Treasury yield retreated from the 5% mark.
Geopolitically, the escalating tensions between Israel and Hamas are heightening global anxieties. Recent events, such as a string of potent explosions in Gaza’s largest refugee camp, which the Israeli military states were targeted towards a high-ranking Hamas member, further muddy the waters. These actions and their subsequent repercussions, including Bolivia severing its diplomatic ties with Israel, potentially paint a bleak picture, thereby indirectly strengthening gold’s position as a safe haven.
Back in the US, all eyes are set on the upcoming monthly employment details, the NFP report, which is slated for release on Friday. This crucial data is expected to play a pivotal role in either bolstering or undercutting gold’s current position.
For those keeping a keen eye on gold from a technical perspective, the $2,000 (R37,000) barrier is the immediate challenge. Surpassing this could pave the way for the metal to target the multi-month high of around $2,008-2,010 (R37,148-R37,185). A decisive break through this range might propel gold towards the $2,022 (R37,406.50) mark. Conversely, the $1,970 (R36,495) range is emerging as a support level. A continued selling trend might see the metal approach the $1,964 (R36,383.50) mark, and potentially plummet to the $1,954-1,953 (R36,149-R36,130.50) range.
Today’s currency data underscores the US Dollar’s strength, especially when matched against the Canadian Dollar. The table provided highlights the USD’s performance against other major world currencies.