Gold Slips After Reaching Record Highs

On Wednesday, the gold (XAU) price fell for the fourth consecutive trading session as investors took profits.

Since reaching a record high of 2,430 on 12 April, has declined by over $100, experiencing a decrease of more than 3% this week.

“There’s been some pressure on some investors, especially on the institutional side, to perhaps raise some cash, and they’ve done that by selling some of their commodity positions,” noted Edward Meir, the analyst at Marex. 

“Profit taking after an extended run higher in gold and lower tangents in the Middle East resulted in a general pullback in prices,” he added.

“In March, U.S. durable goods orders slightly exceeded expectations, while recent S&P PMI data highlighted a slowdown in the growth of the U.S. private sector. Federal Reserve officials don’t want to cut rates too early, so markets are now predicting the first reduction to come as late as September. High-interest rates tend to reduce the attractiveness of non-yielding assets such as gold. Additionally, de-escalating conflict in the Middle East has led investors towards riskier assets, further diminishing demand for gold.

XAU/USD decreased during the Asian trading session but started to rise during the early European trading hours. Today, the market is anticipating the release of the U.S. Gross Domestic Product (GDP) Growth Rate data at 12:30 p.m. UTC. Traders expect the U.S. economy to expand by an annualized 2.5% in Q1 2024. Gold will likely gain a bullish momentum if the figures are lower than the forecast. Otherwise, XAU/USD may drop towards 2,280.

“Spot gold may retest support at $2,295 per ounce, as it failed again to break resistance at $2,336,” said Reuters analyst Wang Tao.

Euro Rises Ahead of the US GDP Report

The euro (EUR) was mostly unchanged on Wednesday as traders awaited the publication of critical U.S. data later this week.

has slightly rebounded after falling towards a five-month low last week. Some divergence in macroeconomic statistics between the eurozone and the U.S. favored the euro. For example, yesterday’s German Ifo Business Climate Index figures were better than expected, and the eurozone Purchasing Managers’ Indices (PMIs) report revealed a big rise in the services sector. Meanwhile, U.S. PMIs came out lower than expected, reviving hopes of an interest rate cut by the Federal Reserve (Fed) in the summer.

However, the technical trend in EUR/USD remains bearish, and investors’ long-term interest rate expectations still favor the . The market believes the European Central Bank (ECB) will cut interest rates in June or July and deliver more than 60 basis points (bps) worth of rate cuts in 2024. At the same time, traders anticipate the Fed will deliver the first rate cut only in September and ease its monetary policy by less than 45 bps this year. The risk is that the expectations can change very quickly if the upcoming data disappoints investors. Joachim Nagel, Bundesbank President, said that the eurozone’s inflation could be stubborn, so further policy easing may not follow after a rate cut in summer.

EUR/USD was rising during the Asian and early European trading sessions. Today, traders should focus on the U.S. data: the Gross Domestic Product (GDP) report at 12:30 p.m. UTC, which might significantly impact all USD pairs. Higher-than-expected figures will definitely boost the US dollar, while lower-than-expected results may push the greenback down. Pending Home Sales data at 2:00 p.m. UTC may also trigger some volatility in EUR/USD. The key levels to watch for the pair are 1.07450 and 1.06650.

Japanese Yen Sets a New 34-year High Ahead of the BOJ rate decision

The Japanese yen lost 0.33% on Wednesday as the (DXY) recovered after a sharp drop on Tuesday.

has risen to its highest level since mid-1990, even though the Japanese finance minister and Bank of Japan’s (BOJ) officials have repeatedly threatened to intervene if the national currency continues to depreciate.

“The move in USD/JPY has been in line with what’s happening with the broad dollar re-assessment. It’s not being driven by BOJ speculation, which it was at one point last year, but a broad dollar move backed by fundamentals,” said Jayati Bharadwaj, the global FX strategist at TD Securities.

The BOJ will begin its two-day-long policy meeting today. Traders widely expect the regulator to leave policy settings and bond purchase amounts unchanged. The decision will be released on Friday by 4:00 a.m. UTC. Senior ruling party official Takao Ochi told Reuters that a decline in the currency towards 160.000 could trigger intervention. Ochi said,

“That may be deemed excessive and could prompt policymakers to consider some action” if the Japanese yen slides further towards 160.00 or 170.00.

USD/JPY was rising during the Asian and early European trading session. Today, the release of two U.S. macro reports: Gross Domestic Product (at 12:30 pm UTC) and Pending Home Sales (at 2:00 pm UTC) may trigger some volatility in all USD pairs. However, the key event for the USD/JPY is the BOJ’s rate decision, which is due on Friday morning. The central bank can potentially include some hawkish language into its Monetary Policy Statement to support the yen. In this case, USD/JPY may drop sharply—possibly, towards 153.00. Otherwise, the pair will probably continue to remain under bullish pressure as long as the price remains above the important 153.50 level.