Gold price retreats to one-week low on easing geopolitical tensions

Easing geopolitical threats and a rising US dollar cause gold to retreat substantially from recent highs. Gold is -2.75% down; trading at $2326.10 per ounce at the time of writing. Gold prices are under pressure because Fed members, particularly Chairman Powell, have a hawkish view on interest rates. As expectations for Federal Reserve rate cuts are shifted to a later schedule, there is a shift in market sentiment. Tehran played down Israel’s April 19 drone strike in reprisal, which was seen as a war escalation.

Gold falls as bids approach $2,300. The price of gold plummeted and created a “bearish engulfing” pattern on the chart, allowing for a retreat. A price decline below the $2,324 daily low on April 15 would allow the XAU/USD pair to reach $2,300. A violation of the latter will reveal the $2,222 high from March 21.

However, the first resistance level for XAU/USD would be $2,400, and the next level would be Friday’s high of $2,417. If the latter is broken, the all-time high of $2,431 will be revealed. Gold prices plunge, retreating more than 2.50% from the previous week’s gains as the Middle East’s problems ease. Jim Wyckoff of Kitco News noted that profit-taking along with a little strengthening of the US dollar could be the cause of the gold metal’s decline.

After reaching a daily high of $2,392, XAU/USD is currently trading at $2,329, driven by the escalating tensions between Iran and Israel last Friday. Furthermore, market players are starting to factor in the possibility that the Fed could lower rates later than anticipated, which is driving down the price of gold.

In other places, hawkish statements were made by Federal Reserve officials, headed by Chairman Jerome Powell, who stated that the prolonged hike in interest rates is justified due to the lack of progress in the disinflation process. One of the FOMC’s most dovish members, Chicago Fed member Austan Goolsbee, echoed him when he remarked that inflationary progress has “stalled.”

As US manufacturing activity picks up speed, gold prices decline. The Chicago Fed National Activity Index rose from 0.09 in February to 0.15 in March. In February, the index’s three-month moving average was -0.28, but in March, it increased to -0.19.

The benchmark rate for US 10-year Treasury notes is 4.611%, down one basis point this week. The performance of the US dollar relative to a basket of six other currencies is measured by the US Dollar Index (DXY), which is up 0.01% to 106.13.

Fed speakers also went across the cables. Raphael Bostic of the Atlanta Fed stated that the rate of inflation is excessive and that the Fed will not be able to lower it. John Williams, the president of the New York Fed, stressed that the Fed is data-dependent and that monetary policy is sound, therefore he wasn’t in a rush to lower rates.

The US economic calendar will be highlighted this week by the release of the March Personal Consumption Expenditure (PCE) Price Index, which is the Fed’s favoured inflation indicator. If the data is softer than anticipated, gold traders may purchase the yellow metal with the goal of resetting all-time highs. If not, a price increase might support US Treasury yields and the US dollar, which would be negative for the precious metal.

The PCE is expected to edge higher, while the Core PCE is expected to decrease from 2.8% to 2.6% YoY. Data from the Chicago Board of Trade (CBOT) suggests that traders expect the fed funds rate to finish 2024 at 4.99%.