Gold News: Gold Price Rebounds From 200-Day MA as Rate-Cut Bets Return

Spot Gold Rallies as Ceasefire and Falling Oil Revive Rate-Cut Case

Spot Gold (XAUUSD) traded near $4,508 on Thursday, up more than 1.6% on the session. Buyers showed up hard off the 200-day moving average at $4,423.23 early in the day and pushed prices back above the bull/bear line at $4,481.78.

West Texas Intermediate crude oil dropped more than 3%. The U.S. Dollar Index pulled back. The 10-Year U.S. Treasury yield eased. Israel and Lebanon agreed to a ceasefire. Lower crude oil takes the inflation pressure off. That gives the Fed room it did not have 24 hours ago and the rate-cut trade that was dead on Wednesday came back to life on Thursday.

Daily Spot Gold (XAUUSD) Technical Analysis

Spot Gold found strong buying early Thursday at $4423.96 after another successful test of the 200-day moving average at $4423.23. The price action suggests it was probably institutional buying since they tend to gravitate toward the long-term trend indicator.

The subsequent intraday rally sent the market to $4514.76, which put it on the strong side of the line that separates the bull market from the bear market. That level is $4481.78.

The market is currently trading on the strong side of the bull/bear line but it has to build support above this level in order to attract fresh money. The problem with gold lately is that it has been supported by passive buying. Investors have been bidding, but few, if any, have been chasing or taking out offers. And that has been capping gains.

Despite the strong rebound rally, XAUUSD still faces headwinds at $4495.33 and $4541.88 before we’ll see a breakout to the upside and another test of the 50-day moving average at $4628.99 today.

To summarize, hold the 200-day MA and buyers will have a shot at eventually overtaking the 50-day MA. Fail at the 200-day MA and prices could plunge to $4366.23 almost immediately before possibly challenging the March 23 main bottom at $4099.12.

Falling Oil Eases Inflation Pressure on Gold

Israel and Lebanon agreed to implement a ceasefire on Thursday. Reports that U.S. lawmakers are pushing back against continued military involvement in the region added to the momentum. West Texas Intermediate crude oil dropped more than 3% on the combination of both.

This is the trade that matters for Spot Gold (XAUUSD). Lower crude oil takes inflation pressure out of the picture. When the inflation argument fades the Fed does not need to stay restrictive. When the Fed gets room to move, gold rallies. That is exactly what played out today. The ceasefire did not send money into gold because of fear. It sent crude oil lower and falling crude oil is what gave gold the bid. The entire rally runs through the rate story, not through safe-haven demand.

Dollar and Yields Give Gold Room

The U.S. Dollar Index pulled back on Thursday after gaining ground earlier in the week. The 10-Year U.S. Treasury yield eased ahead of Friday’s Nonfarm Payrolls report. Both moved in the right direction for Spot Gold (XAUUSD) after spending the first half of the week sitting directly on top of it.

New York Federal Reserve President John Williams said inflation risks tied to the Middle East conflict may not be long-lasting. The market spent Monday through Wednesday pricing a possible rate hike. Williams just told you the Fed does not see it that way. Combine that with crude oil falling more than 3% and the rate picture looks completely different than it did yesterday.

Jobs Data Sends Mixed Signals

Thursday’s jobless claims came in slightly higher than expected. Earlier in the week ADP reported 122,000 private-sector jobs added in May and that number beat expectations. The labor market is not falling apart but jobless claims ticking higher tells you it is not as tight as the ADP number suggested either. The data is pointing in two directions at once.

Friday’s Nonfarm Payrolls settles it. A strong number pushes the 10-Year U.S. Treasury yield and the U.S. Dollar Index higher and takes back what Spot Gold (XAUUSD) gained today. A weak number confirms the softening and gives the rate-cut case more room to build. Everything gold did on Thursday gets tested on Friday morning.

What to Watch

The ceasefire between Israel and Lebanon took West Texas Intermediate crude oil down more than 3% on Thursday and that is the single biggest reason Spot Gold (XAUUSD) rallied 1.6%. Lower crude oil pulls inflation expectations lower. That gives the Fed room it did not have 24 hours ago. New York Federal Reserve President John Williams reinforced that by saying Middle East inflation risks may not be lasting. The rate-cut trade that was dead on Wednesday is back on the table. Friday’s Nonfarm Payrolls is the next gate. A weak number extends the bid. A strong number puts the 10-Year U.S. Treasury yield and the U.S. Dollar Index back in control and shuts the rate-cut conversation down again.

The 200-day moving average at $4,423.23 held again on Thursday with buyers stepping in at $4,423.96. That is the third successful test since January. Spot Gold (XAUUSD) pushed back above the bull/bear line at $4,481.78 but resistance sits at $4,495.33 and $4,541.88 before a run at the 50-day moving average at $4,628.99. A sustained hold above $4,481.78 keeps the bid alive. A failure at the 200-day moving average opens the door to $4,366.23 and potentially the March 23 main bottom at $4,099.12.

If you’d like to know more about how to trade gold, please visit our educational area.