- The price of gold moves down to $ 3.335 in the Asian session on Monday.
- Trump established a term of July 9 for a commercial agreement with the European Union.
- Renewed concerns about inflation and recession fears could help limit gold losses.
The price of gold (Xau/USD) attracts some sellers about $ 3,335 during the first Asian session on Monday. The de -escalation of the commercial war provides some support to the yellow metal. The FOMC minute will be the culminating point later on Wednesday.
On Sunday, US President Donald Trump said he agreed on an extension within the European Union tariffs (EU) until July 9, revoking his threat of a 50% tariff from June 1. The decrease in the fears of a global commercial war drags the precious metal downward.
However, the operators will closely monitor the developments around the commercial agreements between the US and Japan and other commercial agreements of important economies in search of a new impulse. Any rising commercial tensions could boost refuge flows, benefiting the precious metal.
The renewed concerns about inflation and the reduction of the US credit rating could support the price of gold. Moody’s reduced the US credit rating of ‘AAA’ A ‘A’ AA1 ‘. The reduction added fuel to a US dollar (USD) weakened and raised the price of gold called in USD.
Jigar Trivedi, a senior research analyst at Reliance Securities, hopes that the increase in gold prices will continue during the month of June 2025. Trivedi emphasized the key drivers such as the reduction of the Credit Qualification of the US, the continuous purchases of gold by the Chinese Central Bank and commercial tensions.
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.
