- The price of gold is quoted with slight earnings around $ 3,325 in the first Asian session on Tuesday.
- The US and China commercial officials are scheduled to meet in London on Tuesday.
- The Central Bank of China added gold to its reserves in May for seventh consecutive month.
The price of gold (Xau/USD) records modest advances about $ 3,325 during the first Asian session on Tuesday, promoted by a weaker US dollar (USD). Investors expect the ongoing commercial conversations between the US and China on Tuesday in search of new catalysts.
Commercial conversations between the United States (USA) and China are scheduled to continue for a second day in London. US President Donald Trump said conversations “should be very good.” US officials indicated that the elimination of restrictions on some technological exports was indicated in exchange for guarantees that China is relaxing the limits on rare earth shipments, which are critical for a wide range of energy, defense and technology products.
The reduction of commercial tensions could raise the dollar and weigh on the price of raw materials called in USD. “In the short term, if there is a positive result of the meeting, it could be a bit negative for gold, but not too much,” said Bart Melek, head of raw material strategies in TD Securities.
On the other hand, the persistent geopolitical risks in the Middle East could boost the flows to safe refuge assets, supporting the yellow metal. The Israel Ministry of Foreign Affairs said that the arrested crew of the help ship to Gaza, which was intercepted by Israel on Monday morning, docked at the Israeli port of Ashdod on Monday night.
The weekend data showed that the Popular Bank of China (PBOC), the Central Bank of China, bought gold for seventh consecutive month in May. This, in turn, could contribute to the price of gold. PBOC’s gold reserves increased to 73.83 million Troy ounces at the end of May from 73.77 million ounces at the end of April.
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.
