- The price of gold is quoted in negative territory around $ 3,235 in the Asian session on Tuesday.
- The US and China agreed to de -display their commercial war reducing import tariffs on the goods of the other for 90 days.
- Operators prepare for the US April Inflation Report, which will be published later on Tuesday.
The price of gold (Xau/USD) drops to around $ 3,235 during the early Asian session on Tuesday. The precious metal remains defensive due to a stronger US dollar (USD), higher yields in the US and optimism on the commercial agreement between the US and China. Later on Tuesday, operators will take more signs of the US Consumer Price Index (CPI) report.
The feeling of improved risk after the announcement of a temporary agreement between the United States (USA) and China to reduce tariffs has weighed on the safe refuge asset, such as the price of gold. US 10%. The new measures are effective for 90 days.
“The de -escalation of tensions between China and the US is reducing the demand for safe refuge assets such as gold,” said Giovanni Staunovo, an analyst of the Swiss Bank and lighter of London London UBS.
Gold merchants prepare for the US IPC inflation data on Tuesday, which could offer some clues about the US Federal Reserve Policy (FED).
Swaps markets have discounted the first rate of 25 basic points (PBS) of the Fed for the September meeting, and expect two additional reductions towards the end of the year. Last week, they indicated three cuts this year, with a probable change as soon as in July.
India Prime Minister Narendra Modi said on Monday that operations against Pakistan have only been suspended, and the future will depend on their behavior. Meanwhile, Ukrainian President Volodymyr Zelensky said he is prepared to meet with Russian President Vladimir Putin this week, shortly after Trump urged him to “immediately accept” the offer of the Russian leader to hold peace conversations in Turkey. Any sign of climbing geopolitical tensions could increase the flows to safe refuge assets, benefiting the yellow metal.
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.
