Gold price inched up on Thursday as buyers got appetite on the back of weaker-than-expected US economic indicators. Key among these was the huge miss by the US GDP data for the first quarter of 2024. At press time, Gold traded at $2321 per ounce at the spot market, having gained 0.24% in intraday trading. Similarly, the commodity rose by 0.14% at the futures market to trade at $2,342 per ounce.
The US dollar took a hit on Tuesday when the latest US manufacturing and services industries came in lower than expected. The momentum carried over to Wednesday when the market ignored the March reading for US Durable Goods Orders, which grew by 2.6%, higher than the forecast rate of 2.5%.
On Thursday, gold received strong tailwinds from lower-than-expected US GDP readings released on Thursday. The US economy grew by 1.6% in the first quarter of 2024, substantially lower than the forecast 2.5%. This raises the prospects of interest rate cuts by the Federal Reserve in June, as it becomes apparent that higher-for-longer interest rates could hurt the economy further.
Many analysts were betting on a September rate cut after a series of upbeat US macroeconomic data since the beginning of the year. However, the low GDP reading will almost certainly make the Fed rethink its hawkish stance. Also, gold’s safe haven appeal had eased in the aftermath of the easing of geopolitical risks in the Israel-Iran conflict. However, the GDP data will reignite the appetite.
Gold price has also been under pressure from yields on US Treasury bonds, which have remained resiliently high. As of this writing, the returns on 10-year and 5-year bonds have risen above 4.700%. High-yielding US treasuries are strong competitors to non-yielding gold, and the two assets historically have inverse relationship. Therefore, gold’s ascent will be limited by the rising bond yields. Also, Initial jobless claims fell significantly to 207k in the week ending April 18 , performing better than the forecast 214k, thus favouring the dollar.
Technical analysis
The momentum on XAU/USD favours the upside, as indicated by the RSI. The buyers are likely to remain in control if they keep the price above the 2331 pivot mark. If they do so, they could build the momentum to break above the 2337 resistance and potentially test 2346 in extension. However, a move below 2331 will signal control by the sellers, with support coming at 2322. Furthermore, a continuation of that control will likely break the support, invalidating the upside narrative and potentially sending gold price lower to test 2315.
