- The price of gold remains defensive about $ 3,235 in the first Asian session on Friday.
- The decay in the global commercial conflict continues to undermine the price of gold.
- Operators prepare for the US April Employment Report, which will be published later on Friday.
The price of gold (Xau/USD) drops to a minimum of two weeks around $ 3,235 during Friday’s first Asian session. The decrease in commercial tensions between the US and its commercial partners has affected the demand for safe refuge, weighing on the precious metal.
The president of the USA, Donald Trump, announced possible trade agreements with India, South Korea and Japan, seeking to convert his tariff policy into commercial agreements. In addition, Chinese state media reported late on Thursday that the US has contacted China to start commercial conversations about Trump’s 145% tariffs.
The US dollar (USD) is strengthened due to this positive development, which makes gold less attractive to buyers of other currencies. “The market sees that commercial tensions are being broken down and is less concerned with the independence of the Fed, reducing the demand for shelter assets for now,” said UBS Giovanni Staunovo analyst.
After the US gross domestic product (GDP) of the first weakest quarter of what is expected on Wednesday, markets are now valuing greater possibilities of more rates cuts by the Federal Reserve (FED), although everything depends on the commercial agreements. This, in turn, could boost the price of gold without performance.
The US April Employment Report will be the culminating point later on Friday, as it could boost the US Fed to start cutting rates sooner rather than later. If the report shows a weaker result, this could affect the USD and limit the fall in the price of the commodity called in USD.
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.
