- The price of gold rises to around $ 3,375 in the first Asian session on Monday.
- The increasing tensions after the bombing of Iran’s nuclear sites by the US have driven the price of gold.
- Waller of the Fed said that the Central Bank is in a position to cut rates as soon as in July.
The price of gold (Xau/USD) rises to about $ 3,375 during the first Asian session on Monday. The decision of US President Donald Trump to join the Israel War against Iran drastically scale the conflict, which raises the precious metal. The operators will be attentive to the preliminary reading of the purchasing managers index (PMI) of the US S&P global for June later on Monday.
The US carried out air attacks in three nuclear sites in Iran Early on Sunday, entering the Israel War with Iran despite Trump’s promises to avoid new foreign conflicts. The increasing tensions after the bombardment of Iran’s nuclear sites by the US promotes the flows to safe shelters and benefit the price of gold, since it is traditionally considered a coverage during times of political and economic uncertainty.
The governor of the Federal Reserve (Fed), Christopher Waller, said Friday that the Fed is in a position to cut the policy rate as soon as in July. The moderate comments of the FED officials could weigh on the dollar and provide some support to the price of the merchandise called in USD, since a weaker USD makes gold cheaper for foreign buyers.
Investors prepare for the preliminary reading of the US PMI of the US Global for June. Any surprise up in the US economic data could raise the USD and limit the yellow metal rise potential.
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.
