- Gold faces some small profit taking on Monday at start of the week.
- US yields are off their year-to-date low after President Trump avoids using the word “recession” in a press conference.
- Traders are preparing for the upcoming Fed meeting on March 19 as the blackout period begins.
Gold’s price (XAU/USD) is nearing the $2,900 level at the start of the week in some selling pressure on Monday. Traders are mulling over comments from United States (US) President Donald Trump after an interview on Fox News over the weekend. When asked about the US economy, President Trump said that the economy is in a ‘transition’ phase, while markets have already floated the idea that the US economy is in a recession scenario.
Meanwhile, Federal Reserve (Fed) Chairman Jerome Powell issued some remarks on Friday before the Fed’s blackout period started. That blackout period precedes the actual policy rate decision on March 19, where expectations are for keeping the policy rate steady. Powell said that the central bank does not need to do anything at this point and that the price for keeping its policy rate steady comes with a very small price against the chances of a policy mistake by changing interest rates preemptively.
Daily digest market movers: No rate cut yet
- US President Donald Trump said the economy faced “a period of transition” as he pressed on with his focus on tariffs and federal job cuts, Bloomberg reports.
- Fed Chair Jerome Powell acknowledged on Friday the rising economic uncertainties in the US but said the central bank does not need to rush to adjust policy. Among recent data points, the Atlanta Fed’s Gross Domestic Product (GDP) gauge signaled the US economy may shrink this quarter. Lower borrowing costs tend to be beneficial for Gold, Reuters reports.
- The CME Fedwatch Tool sees a 97.0% chance for no rate changes in the upcoming Fed policy meeting on March 19. The odds for an interest rate cut by the June 18 meeting have grown now to 81.8% on Monday.
Technical Analysis: US economy transition
It is time for markets to settle down and see a pullback after stretched positions and moves on the charts. The same goes for Bullion, where the precious metal would benefit from a pullback. Should President Trump remain relatively quiet on any additional tariffs, the nervousness would start to settle and would see Gold dipping towards the S2 support of the daily Pivot Point near $2,878 or even lower, ideal for bulls to get back in before reciprocal tariffs are set to hit by next month.
While Gold trades near $2,905 at the time of writing on Monday, the daily Pivot Point at $2,912 and the daily R1 resistance at $2,927 are the key levels to watch for. In case Gold sees more inflows, the daily R2 resistance at $2,945 will possibly be the final cap ahead of the all-time high of $2,956 reached on February 24.
On the downside, the $2,900 psychological big figure and the S1 support at $2,893 acts as a double support barrier. If Bullion bulls want to avoid another leg lower, that zone must hold. Further down, the daily S2 support at $2,878 should be able to catch any additional downside pressure.
XAU/USD: Daily Chart
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.