Gold price climbs to weekly peak; markets await US jobs data

• Gold extends rally to $2,650, shrugging off a rising US Dollar amid demand for safe-haven assets.
• Escalation in Russia-Ukraine conflict and nuclear threats from Putin contribute to the surge in Gold.
• Fed Governors' comments provide mixed insights on the potential direction of US monetary policy in December.

Gold price climbs extending its gains for the third straight day, shrugs off a buoyant US Dollar as risk aversion boosts safe-haven assets. The golden metal has risen over 3.40% during the week, with buyers eyeing the $2,700 mark. The XAU/USD trades at $2,650, up 0.69%.

Bullion’s decline toward a two-month low of $2,536 can mainly be attributed to investors booking profits after President Donald Trump's victory in the US elections. Fears that some of his proposals could spark a reacceleration of inflation sent US Treasury yields soaring and underpinned the Greenback.

Nevertheless, Bullion prices had risen due to the escalation of the Russia-Ukraine conflict.

On Tuesday, Russian President Vladimir Putin authorized the use of nuclear weapons in retaliation to the West. Reports revealed the White House authorized Ukraine's use of American weapons inside Russia, according to officials.

In the meantime, the American currency advances 0.51% in the day, according to the US Dollar Index (DXY), which tracks the buck's performance against six other peers. The DXY is at 106.69 after sinking to a five-day low of 106.11.

Recently, Fed Board Governors Lisa Cook and Michelle Bowman failed to clarify the outcome of the December Federal Open Market Committee (FOMC) policy meeting.

Cook remains confident the Fed will lower inflation toward the 2% goal, but she didn’t reveal whether she will support a rate cut next month. Bowman added that despite seeing “considerable progress” on inflation, it seems to have “stalled in recent months,” meaning the Fed should be cautious. She commented that neutral rates could not be as low as expected, by some officials at the FOMC.

Traders trimmed the chances for a 25 basis points rate cut at the December meeting. The CME FedWatch Tool sees a 55% probability of lowering rates, down from a 58% chance a day ago.

Ahead of this week, the US economic schedule will feature Initial Jobless Claims, S&P Global Flash PMIs, and the University of Michigan (UoM) final reading of Consumer Sentiment for November.

Daily digest market movers: Gold price and the Greenback advance

• Gold prices recovered even though US real yields climbed one basis point to 2.07%.
• US Treasury bond yields are rising, with the 10-year benchmark rate up one basis points to 4.41%.
• On Thursday, US Initial Jobless Claims are expected to rise from 217K to 220K for the week ending November 16.
• US Existing Home Sales are projected to rise from 3.854 million to 3.93 million.
• According to data from the Chicago Board of Trade via the December fed funds futures contract, investors are pricing in 22 basis points of Federal Reserve rate cuts by the end of 2024.
• On Monday, US President Joe Biden authorized Ukraine's use of long-range missiles inside Russia, CNN revealed. The decision comes as a reaction to thousands of North Korean troops being deployed in support of Moscow’s war effort.
• Donald Trump’s policies of higher tariffs and lower taxes are potential drivers of inflation and might slow the Fed’s easing cycle.

Technical outlook: Gold buyers to challenge the 50-day SMA

Gold price is upward biased, yet buyers must clear key resistance levels ahead. If XAU/USD clears the 50-day Simple Moving Average (SMA) at $2,658, it could find acceptance at around $2,700. A breach of the latter will expose the November 7 high of $2,710 and the psychological $2,750 figure.

Conversely, sellers will have the upper hand if the non-yielding metal drops below $2,600. Further downside is seen, with the following support being the 100-day Simple Moving Average (SMA) at $2,550. Bears could target the November 14 swing low of $2,536, followed by XAU/USD diving to $2,500.

The Relative Strength Index (RSI) remains bearish, but it is closing into the neutral line, indicating that Gold buyers are gathering short-term momentum.

Gold FAQs

Why do people invest in Gold?

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.

Who buys the most Gold?

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.

How is Gold correlated with other assets?

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.

What does the price of Gold depend on?

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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