- The price of gold moves down to $ 3.245 in the early Asian session on Wednesday.
- The improvement of appetite due to the risk after the reduction of rates between the US and China weighs on the price of gold.
- Growing tensions and uncertainty could help limit gold losses.
The price of gold (Xau/USD) quotes in negative territory around $ 3,245 during the early Asian session on Wednesday. The improvement of appetite for the risk in financial markets due to a tariff agreement between the United States (USA) and China weighs on the yellow metal, an asset refuge. The operators will focus on the FED statements later on Wednesday.
The United States and China, the two largest economies in the world, agreed to reduce rates from each other after two days of negotiations in Geneva, Switzerland. USA reduced rates on Chinese imports to 30% from 145%, while China cut the rates on US imports to 10% from 125%. These positive developments drive market feeling and undermine precious metal.
In addition, the decrease in tensions between India and Pakistan also weighed on the price of gold. The high fire remained intact in Jammu and Kashmira and in the border cities during the night, after the blunt message of the Prime Minister of India, Narendra Modi, to the terrorists and Pakistan. Modi said on Monday that India will not tolerate any “nuclear blackmail.” He added that operations against Pakistan have only paused, and the future will depend on their behavior.
“Gold and silver showed a strong sale at the beginning of the new week in the middle of a commercial agreement between the US and China in Switzerland. The dollar index and the yields of the US bonds Prithvifinmart Commodity Research.
However, any climbing signal between India and Pakistan, together with the economic uncertainty caused by the tariff policies of the US president, Donald Trump, could boost the safe refuge flows, benefiting the price of gold.
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.
