Gold falls as USD finds a floor and recovers
LONDON (May 7) The Gold price (XAU/USD) trades down by roughly a third of a percent, in the $2,310s on Tuesday, as the US Dollar (USD) recovers, reducing the cost of Gold which is priced in USD.
Gold price declines on stronger Dollar
Gold price declines on Tuesday after a rebound in the US Dollar reduces the cost of the precious metal in USD terms.
Although last week’s US Nonfarm Payrolls data showed a weakening labor market that suggested the Federal Reserve (Fed) might cut interest rates sooner than had been anticipated, commentary from Fed members over the last few days continued to show a reluctance by policymakers to hurry lowering borrowing costs.
On Monday, Richmond Fed President Thomas Barkin said that the current interest rate level should cool the economy enough to bring down inflation to the Fed’s 2.0% target but that it would be a "stubborn road back," and that, "It doesn't mean you won't get it back. It just means it takes a while”.
Meanwhile, New York Fed President John Williams stated that there would be rate cuts eventually and that he saw job growth moderating, but that the Fed would be looking at the “totality” of data before making its decision.
Markets have priced in rate cuts worth 46 basis points (bps) from the Fed by the end of 2024, with the first cut expected in September or November, according to LSEG's rate probability app, according to FXStreet’s Editor Lallalit Srijandorn.
Unfinished Measured Move
Gold price is potentially still in the middle of unfolding a bearish Measured Move price pattern which began on April 19.
Measured Moves are zig-zag type patterns composed of three waves labeled A, B and C, with C usually equalling the length of A or a Fibonnaci 0.681 of A. Price has fallen to the conservative estimate for wave C at $2,286, the Fibonacci 0.681 of wave A.
Wave C could still go lower, however, and reach the 100% extrapolation of A at $2,245. Such a move would be confirmed by a decisive break below the range and the May 3 low at $2,277.
The trend for Gold price is up on both the medium and long-term charts (daily and weekly), overall adding a supportive backdraft to the outlook.
FXStreet
