Gold price rose slightly on Monday morning as investors focused on the falling oil and US bond yields. It rose to $4,211, up slightly above its monthly low of $4,062. Focus among traders will be on the upcoming US inflation data and a statement from Kevin Warsh, the Fed Chairman.
Gold price jumps as crude oil and US bond yields fall
XAU/USD rose as Brent and West Texas Intermediate (WTI) fell in early trading despite the escalating Saudi Arabia and Houthi tensions. Houthis launched two strikes at King Khalid Airport, killing 12 people and seriously injuring hundreds of them. This crisis risks spreading as the midterm elections in the US near.
Oil prices fell after Trump announced that Ukraine and Russia had reached an “energy ceasefire”, a statement that caught Volodymyr Zelensky by surprise. His statement came two days after he announced a deal to allow Russia to sell its oil internationally.
Trump hopes that these options by Russia will help to lower diesel prices, which is hovering near its all-time high in the United States.
The falling oil prices have also contributed to the ongoing events in the bond market, where US yields are in a downward trend. The ten-year yield fell to 5.225%, while the 30-year moved to 5.59%. Gold benefits whenever US bond yields are falling because it makes it more attractive as an investment.
Additionally, American investors are slowly rotating to gold funds. The popular SPDR Gold Shares ETF (GLD) added $1.28 billion in assets in the last 30 days. Similarly, the smaller iShares Gold Trust (IAU) has added $439 million in the same period.
The next important catalyst for gold price will be the upcoming US consumer inflation report coming out on Wednesday. This is a crucial statement as it will provide more information about what to expect from the Fed.
If the inflation figure comes out short of expectations, it will lower the probability of the Federal Reserve hiking interest rates this year. Besides, the US has already published a weak nonfarm payrolls report, suggesting that the labor market is not all that strong.
On the other hand, if inflation data comes out stronger than expected, it will raise the possibility of the Fed hiking rates at least once this year. Kevin Warsh, the Fed Chair, will talk later this week and possibly provide hints about the next move.
Gold technical analysis
Gold price chart | Source: TradingView
The daily chart shows that gold has been in a slow downward trend after peaking at $4,692 in August to a low of $4,062. It then bounced back to the current $4,208.
Despite this rebound, gold remains much lower than the 50-day Exponential Moving Average (EMA), a sign that bears remain in control. It also remains below the Supertrend indicator.
Notably, there are signs that it is forming a series of lower lows and lower highs. Therefore, gold will likely resume the downward trend, potentially to the psychological level of $4,000.
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