- Gold-backed ETFs see biggest net inflows since 2022, supporting prices.
- Traders eye US economic data, including Core PCE inflation gauge this week.
- Signs of buyer exhaustion emerge as Gold hovers near all-time highs.
Gold prices surged during the North American session after hitting a record high of $2,956 as the Greenback weakened and US Treasury bond yields fell. At the time of writing, XAU/USD trades at $2,949, up 0.49%.
Uncertainty keeps Bullion prices underpinned as investors consider trade policies US President Donald Trump proposed. Geopolitics continued to be in the second stage as the Ukraine-Russia conflict seems closer to being resolved, while increasing tensions in the Middle East fueled demand for Gold.
Gold prices have risen for the past eight weeks, spurred by the most significant net inflows into Gold-backed ETFs since 2022, revealed Bloomberg.
Even though XAU/USD could be poised to remain near all-time highs, it seems that buyers have lost a step as price action shows signs of exhaustion.
This week, the US economic docket will feature Federal Reserve (Fed) speakers, the Conference Board Consumer Confidence, housing data, Durable Goods Orders, the second reading of Q4 GDP, and the release of the Fed’s preferred inflation gauge—the Core Personal Consumption Expenditures (PCE) Price Index.
Daily digest market movers: Gold price capitalizes on US yields drop
- The US 10-year Treasury note yield has tumbled one basis point to 4.443%, a tailwind for the precious metal. US real yields, as measured by the yield in the US 10-year Treasury Inflation-Protected Securities (TIPS), stay firm near 2.017%.
- The Conference Board Consumer Confidence is expected to drop from 104.1 to 103 in February.
- US business activity data in the United States (US) revealed last Friday was mixed with the S&P Global Manufacturing PMI expanding while the Services PMI shrank. Also, inflation expectations rose, and consumer sentiment deteriorated, revealed the University of Michigan (UoM).
- The Fed’s Meeting Minutes from Wednesday revealed that Trump’s trade and immigration policies fueled concerns over rising prices.
- The World Gold Council revealed that central bank purchases rose more than 54% YoY to 333 tonnes following Trump’s victory.
- Last week, Goldman Sachs upwardly revised Gold price projections to $3,100 by the end of 2025.
- Money market fed funds futures are pricing in 50 basis points of easing by the Fed in 2025.
XAU/USD technical outlook: Gold price hovers near all-time high
Gold price is tilted to the upside, though buyers seem to be losing some steam. Despite hitting an all-time high, XAU/USD paired some of those gains and retreated below $2,950 amid bulls’ lack of strength to drive the yellow metal to $3,000. In addition, the Relative Strength Index (RSI) is overbought. Once the RSI resumes its downward path toward neutrality, the precious metal will be under selling pressure.
In that outcome, Gold’s first support would be the $2,900 mark, followed by the February 14 swing low of $2,877, followed by the February 12 daily low of $2,864.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
