Gold Rallies Following Mixed US Data, Declining T-yields

The weaker US dollar and falling US Treasury yields have kept gold prices anchored around $2,300. Fed Chair Powell’s suggestion that rates might be lowered this year, if inflation keeps falling, helped the XAU/USD Index rise.

US Data Lifts Gold Price

Precious metals are rising even if ADP data shows a strong job market and indications of a slowdown in services activity. With the support of declining US dollar and declining US Treasury bond yields, gold prices are climbing steadily as they get closer to the crucial $2,300 milestone on Wednesday.

The US dollar’s value was impacted by comments by Federal Reserve officials, strong jobs data, and a downturn in the services sector’s business activity. Consequently, the spot price of XAU/USD has increased by more than 0.60% to $2,295, reviving all-time highs.

Powell’s Recent Comments Benefit Gold Price

Fed Chair Jerome Powell has stated that the US central bank has time to carefully explore lowering interest rates given the strength of the US economy and inflation data. He reiterated their pledge to lower borrowing costs “sometime this year” if the forecasted growth in the economy holds true.

Nevertheless, Powell emphasized that this might not happen until they “have greater confidence that inflation is moving sustainably down.” The president of the Atlanta Fed, Raphael Bostic, has previously stated that even if the economy is expanding rapidly, growth and inflation must slow. In the later half of 2024, he projects that rates will be cut, and by 2026, inflation will have reached the Fed’s target of 2%.

Mixed Signals for the US Economy

The Services PMI and employment numbers were emphasized in the US economic calendar. ADP’s March data on private sector job growth was better than anticipated, suggesting a strong labour market that supports the US dollar. The US Dollar’s recovery has been constrained, nevertheless, by indications of a slowdown in business activity from recent S&P Global and ISM Services PMI data.

With 184,000 new jobs added in March, the ADP Employment Change surpassed forecasts for February’s 155,000 and March’s 148,000 positions. S&P Global reported a decline in the activity of the service sector, with the Services PMI falling from 52.3 to 51.7 and the Composite Index falling from 52.5 to 52.1. The ISM’s Non-Manufacturing PMI dropped to 51.4 from 52.6 the previous month and 52.7 the expected value, suggesting that the growth of the service sector has slowed.

Fed Officials Signal Rate Cuts on the Horizon

The president of the Cleveland Fed, Loretta Mester, stated that although the data does not support a rate drop by the May meeting, she expects three rate decreases in 2024, underscoring the difficulty the Fed faces in striking a balance between inflation and employment hazards.

In a similar vein, President of the San Francisco Fed Mary Daly stressed the importance of determining how long current interest rates will remain unchanged. Daly made it clear that this prognosis should be viewed as a prediction rather than a promise, even though she supports the potential of three rate drops.

According to the CME FedWatch Tool, traders presently give the possibility of the US central bank lowering borrowing prices a 58% likelihood of happening in terms of future interest rate changes by the Federal Reserve.

Gold Technically Poised for Further Gains

Technically, gold is expected to continue rising as buyers aim for $2,300. The yellow metal appears to be approaching $2,300 on the XAU/USD daily chart, indicating that fresh buying pressure is being seen in the Relative Strength Index (RSI). I said on Monday that the Relative Strength Index (RSI) on the XAU/USD daily chart shows that Gold’s most recent surge to new all-time highs was accomplished on weaker momentum. But as of this writing, the RSI has crossed over the 80.00 mark, a sign indicating buyers are in control.

The psychological $2,350 number would come next as resistance, with price action now in unknown terrain. The next resistance level would be the $2,300 mark. $2,400 would be up next. However, if XAU/USD falls below $2,250, it might encourage a correction. The $2,200 mark would be the initial support, then the high from March 8 converted into support at $2,195, before continuing its losses to $2,150.