Gold refreshes record high above $2,400 amid downbeat US Dollar, mixed sentiment

Global financial markets witness a slower start to the key week as traders seek more clues to extend the previous week’s momentum suggesting rate cuts from major central banks, including the US Federal Reserve (Fed). It’s worth noting that the holidays in the majority of Europe, Switzerland, and Canada, as well as a light calendar, also restrict the trading moves early Monday.

That said, the US Dollar stays pressured after posting a weekly loss as traders make peace with the Fed’s signals for rate cuts in late 2024. The same joins the European Central Bank (ECB) officials’ hesitance to favor the rate cuts after June to propel the EURUSD pair. On the same line, GBPUSD also edges higher amid the Bank of England (BoE) policymakers’ defense of the restrictive monetary policy.

USDJPY bucks the trend while edging higher amid the Bank of Japan’s (BoJ) uneasiness with the rate hike concerns, as well as due to the recent corrective bounce in the top-tier US Treasury bond yields.

AUDUSD stays on the front foot after posting the weekly gains whereas NZDUSD bulls take a breather ahead of this week’s Reserve Bank of New Zealand (RBNZ) monetary policy announcements. Moving on, USDCAD holds lower grounds after a two-week downtrend amid firmer Oil prices and the US Dollar’s weakness, ignoring the dovish concerns about the Bank of Canada (BoC). Additionally, Gold price rose to a fresh all-time high as a technical breakout joined the traders’ rush toward the yellow metal in expectations of lower rates, especially amid a mixed market mood.

Elsewhere, BTCUSD stays on the front foot after posting the biggest weekly jump since early March whereas the ETHUSD remains firmer following a strong week. That said, the cryptocurrency market witnessed a jump in activity due to the political donations and preparations ahead of the spot Ethereum ETF approvals, especially amid the downbeat US Dollar.

Following are the latest moves of the key assets:

• WTI Crude oil remains on the front foot after posting the biggest weekly gains in four, up half a percent on a day near $79.80 by the press time.
• Gold price seesaws around the all-time high, following an uptick to $2,450 to refresh the record top.
• The USD Index holds lower grounds near 104.40 after a downbeat week.
• Wall Street closed mixed but the Asia-Pacific shares edge higher of late. Further, British and European shares remain lackluster during the initial trading hour.
• BTCUSD and ETHUSD rise more than 1.0% each to near $67,000 and $3,110 at the latest.

US Dollar bears the burden of Fed’s hesitance for rate hikes, softer inflation…

Although the market witnessed inactivity, the US Dollar remains pressured amid the concerns suggesting the Fed’s two rate cuts in 2024. The Greenback’s fall took clues from last week’s downbeat US inflation numbers and the Fed officials’ inability to push back the rate hike concerns. Also exerting downside pressure on the USD could be the cautious optimism on the equities front and the mixed performance of the Treasury bond yields. Furthermore, the weekend news of China’s sale of heavy US Treasury bonds to shift its reliance from the US Dollar also challenged the Greenback buyers of late.

It’s worth noting, however, that the comparatively more hawkish mood at the Fed versus the other major central banks joins the geopolitical woes emanating from China, Russia, and the Middle East to put a floor under the US currency. Earlier on Monday, Iran's President Ebrahim Raisi and Foreign Minister suffered a deadly plane crash and renewed fears of more geopolitical drama in the Middle East.

On a different page, Reuters unveiled an analysis suggesting more pressure on the BoJ to lift the rates amid weak consumption. However, the policymakers have steadily been dovish in their latest appearances despite the heavy slump in the Yen prices.

ECB officials have almost confirmed the June rate cut but the following path appears unclear and hence allows the EURUSD pair to cheer the US Dollar’s weakness around the monthly high. In the same way, the GBPUSD pair also stays firmer despite mixed concerns about the UK’s economic transition as the BoE talks appear mostly hawkish even as market players anticipate the rate cuts in the second half of 2024.

Crude Oil picks up bids after a steady draw in the inventories and rising concerns about the OPEC+ extension of the supply cut accord. Further, the Middle East jitters also suggest a supply crunch while China’s readiness for more stimulus helps the black gold buyers to anticipate more demand and lift the prices.

Gold cheers upside break of the $2,400 resistance, now immediate support, while refreshing the all-time high near $2,450, targeting the 61.8% Fibonacci Extension of its March-April moves, close to $2,455. In doing so, the precious metal benefits from the softer US Dollar and sluggish yields, as well as the traders’ rush toward safety due to the mixed geopolitical headlines and uncertainty about the rate actions from major central banks, especially after the first rate reduction. Additionally, helping the XAUUSD buyers is China’s push for more stimulus and a record rally in equities ahead of this year’s national elections in the top-tier economies.

• Strong buy: USDCAD, USDJPY, US Dollar
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold
• Sell: DAX, FTSE 100, BTCUSD, EURUSD

A likely dull Monday ahead…

Given the holidays in European, Swiss and Canadian markets, coupled with a lack of major data/events, the momentum traders may witness an inactive Monday. However, multiple Fed policymakers are up for speaking and can allow the US Dollar to lick its wounds if they manage to convince traders about a delayed rate cut. Furthermore, the West’s reaction to the Iranian tragedy might also help fuel liquidity in the commodity markets. Above all, this week’s preliminary readings of the May month’s PMIs and the US Durable Goods Orders will be the important catalysts to watch for clear directions.

May the trading luck be with you!