- Gold falls on Monday after a turbulent weekend on tariffs and deportations.
- The US yields fall even more while investors seek security.
- Gold fades just before a new historical maximum.
The price of gold (Xau/usd) falls below $ 2,760 at the time of writing on Monday after a weekend full of headlines and a week occupied in terms of the decision of the Central Bank. During the weekend, markets understood why the president of the United States (USA), Donald Trump, has softened the use of tariffs as a tool. It seems that tariffs will be used as leverage, for example, for countries that refuse to accept US deported immigrants who are being returned to their country of origin.
Colombia had a sample of the manual on Sunday when President Trump ordered 25% emergency tariffs, and a 50% increase in a week, since the country did not meet the deportation demands of President Trump. However, the White House later confirmed that “Colombia has accepted all the terms of President Donald Trump, including the acceptance without restrictions of all the illegal immigrants of Colombia returned from the United States,” and the tariffs proposed by Trump were ” now waiting. ”
Later this week, the Federal Reserve (Fed) and the European Central Bank (ECB) will decide on monetary policy rates on Wednesday and Thursday, respectively.
Market promoters: the revealed manual
- The perspective of gold remains positive due to the strong demand of central banks, with the reputation of precious metal as an alternative reserve asset that continues to attract investors, according to Kotak Securities LTD, Bloomberg reports.
- Gold fell, since the US dollar (USD) rose after President Donald Trump refrained from imposing tariffs threatened with Colombia, since the two countries reached an agreement on the return of deported migrants, reports Reuters.
- The CME Fedwatch tool projects any change in the policy rate for the next decision of the Federal Reserve. Looking ahead, the decision of Mays of May has a probability of 43.8% of a rate cut of 25 basic points compared to 45.4% of any change.
Technical analysis: touching the roof
The rally of the price of gold stops and seems to be playing a brake this Monday after President Donald Trump demonstrated during the weekend how and when the tariffs will be used. This was enough to trigger some panic in the markets, since it was clear that President Trump is not softening tariffs at all. Meanwhile, gold had reached overcompra levels in the indicator of the Relative Force Index (RSI) in the daily chart, and could see some more sales pressure from now on.
The first support line remains at $ 2,721, a kind of double ceiling in November and December broken on January 21. Just below that, $ 2,709 (minimum of October 23, 2024) is in focus as a second close support. In the event that both levels mentioned are broken, look for a fall back to $ 2,680 with a massive sale at full speed.
On the contrary, gold could still reach the historical maximum of $ 2,790, which is around 1% above the current levels. Once above that, a new historical maximum will be presented. Meanwhile, some analysts and strategists have predicted calls to $ 3,000, but $ 2,800 seems to be a good starting point such as the next rising resistance.
Xau/USD: Daily Chart
FAQS GOLD
Gold has played a fundamental role in the history of mankind, since it has been widely used as a deposit of value and a half of exchange. At present, apart from its brightness and use for jewelry, precious metal is considered an active refuge, which means that it is considered a good investment in turbulent times. Gold is also considered a coverage against inflation and depreciation of currencies, since it does not depend on any specific issuer or government.
Central banks are the greatest gold holders. In their objective of supporting their currencies in turbulent times, central banks tend to diversify their reserves and buy gold to improve the perception of strength of the economy and currency. High gold reserves can be a source of trust for the solvency of a country. Central banks added 1,136 tons of gold worth 70,000 million to their reservations in 2022, according to data from the World Gold Council. It is the largest annual purchase since there are records. The central banks of emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has a reverse correlation with the US dollar and US Treasury bonds, which are the main reserve and shelter assets. When the dollar depreciates, the price of gold tends to rise, which allows investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rebound in the stock market tends to weaken the price of gold, while mass sales in higher risk markets tend to favor precious metal.
The price of gold can move due to a wide range of factors. Geopolitical instability or fear of a deep recession can cause the price of gold to rise rapidly due to its condition of active refuge. As an asset without yield, the price of gold tends to rise when interest rates lower, while the money increases to the yellow metal. Even so, most movements depend on how the US dollar (USD) behaves, since the asset is quoted in dollars (Xau/USD). A strong dollar tends to keep the price of gold controlled, while a weakest dollar probably thrusts gold prices.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
