- The price of gold struggles to gain ground while the broader risk rally reduces the demand for safe refuge.
- The high fire between Israel and Iran has strengthened the appetite for the risk of investors.
- The president of the FED, Powell, declared on Tuesday that current monetary policy is appropriate considering uncertainty about tariff policy.
The price of gold (Xau/USD) is consolidated around $ 3,325 during European negotiation hours on Wednesday. The precious metal oscillates within the negotiation range on Tuesday, while its perspective seems uncertain as investors continue to increase bets in more risky assets, after the announcement of a high fire between Israel and I will go on Tuesday.
The decrease in geopolitical tensions often leads to a drop in the demand for safe refuge assets, such as gold.
The president of the United States (USA) said in a publication on Truth.Social on Wednesday that both Israel and Iran have agreed a truce and urged them not to violate it.
Meanwhile, the comments of the President of the Federal Reserve (FED), Jerome Powell, in his semiannual testimony on Tuesday, in which he vanished the hopes of an interest rate cut at the July monetary policy meeting, they have also weighed on the price of gold.
Jerome Powell declared that the Central Bank is “well positioned to wait to learn more about the probable course of the economy before considering any adjustment to our policy position.” Powell guided the Central Bank closely monitoring the “impact of tariffs imposed by President Trump on inflation through June and July data.” He added that he will support interest rate cuts sooner if the data suggests that the impact of tariffs on inflation is not as large as Fed anticipated previously.
Theoretically, higher interest rates by the Fed for a longer period are unfavorable for assets that do not generate performance, such as gold.
Technical Gold Analysis
The price of gold is negotiated in an ascending triangle formation in a daily framework, indicating a contraction of volatility. The horizontal resistance of the aforementioned graphic pattern is drawn from the maximum of April 22 around $ 3,500, while the ascending trend line is placed from the minimum of April 7, 2,957 $.
The precious metal is negotiated below the 20 -day exponential (EMA) mobile average, which suggests that the short -term trend has become bassist.
The 14-day relative force (RSI) index oscillates within the range of 40.00-60.00, indicating a lateral trend.
Looking up, the price of gold would enter an unexplored territory after breaking decisively above the psychological level of $ 3,500. Potential resistances would be $ 3,550 and $ 3,600.
Alternatively, a downward movement of the gold price below the minimum of May 29, $ 3,245 would drag it towards the round level support of $ 3,200, followed by the minimum of May 15 at $ 3,121.
Daily Gold Graph
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.
