- The price of gold moves up to $ 3,310 in the first Asian session on Monday.
- Economic uncertainty and geopolitical risks provide some support for the price of gold, a safe refuge asset.
- The US PCE inflation was softened to 2.1% year -on -year in April, softer than expected.
The price of gold (Xau/USD) bounces around $ 3,310 during the first hours of Monday’s Asian negotiation. Continuous uncertainty about persistent tariffs and geopolitical tensions increase the demand for refuge assets such as gold. Investors will keep an eye on the report of the purchasing managers index (PMI) of manufacturing of the US ISM of May, which will be published later on Monday.
The precious metal moves up in the midst of renewed tensions between the United States (USA) and China. The president of the USA, Donald Trump, said Friday that China had violated his commercial agreement. This, in turn, has fed uncertainty in global markets and provided some support for the price of gold.
However, US Treasury secretary, Scott Besent, said Sunday that Trump and Chinese president Xi Jinping will probably speak soon to solve commercial problems, including a dispute over critical minerals. Any positive development around commercial conversations between the US and China could limit the bullish potential for yellow metal.
In addition, the growing geopolitical tensions in the Middle East support the yellow metal. The BBC reported early Monday that Ukraine said he had completed his greatest long -range attack with Russia on Sunday, after the use of smuggling drones to launch a series of important attacks against 40 Russian war airplanes in four military bases.
A softer inflation report in the US keeps the hopes of a rate cut alive. The US Personal Consumption Expenditure Index (PCE) rose 2.1% year -on -year in April, compared to 2.3% in March, according to the US economic analysis office showed on Friday. This figure was below the 2.2% prognosis.
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.
