Gold Benefits from Thursday’s Softer US Dollar

A lower US dollar and predictions of falling interest rates have helped to support the price of gold. The US Dollar index was down 0.4% at 102.20, making gold prices denominated in dollars more appealing. On Thursday, XAU/USD fluctuated between a low of $1,955 and a high of $1,984.36 before stabilizing at $1979.61.

Experts contend that despite the lack of convincing evidence of a benefit from safe-haven demand in gold markets, investor engagement has remained low. In truth, despite significant purchasing activity in China, the white metal’s ascent has been hampered by weak CTA flows.

As a result of a trend lower in crucial trigger levels, considerable algorithmic purchasing activity has finally begun on Thursday, driving prices higher overnight amid several large-scale CTA buying programmes. This could help the metal outperform.

The February reading of personal consumption expenditures (PCE), the Federal Reserve’s favoured inflation index, will be revealed on Friday and might act as a stimulus for the gold market. The numbers will be eagerly watched because January’s figures revealed a strong rise in consumer expenditure.

Mixed messages have come from Fed officials, but Jerome Powell said last week that the recent instability in the banking sector might have the same effect as 25 basis points of tightening. Some Federal Reserve officials have, however, made it clear that additional tightening will be necessary if inflation worries continue.

Moreover, US data released on Thursday showed that fourth-quarter GDP growth was slightly lower at 2.6% compared to earlier estimates of 2.7%, supporting the case for a looser stance from the Fed. Jobless Claims last week increased more than expected from the week prior, indicating a cooling labour market.

Technically, the gold price was testing a resistance level in the $1,980s, but the W-formation was a bearish pattern, which drew downward pressure on the gold price. At neckline support, gold price bulls entered the market, and the metal has since climbed back into resistance.