- The price of gold rises to about $ 3,365 in the first measures of the Asian session on Monday.
- Trump’s announcement about new EU tariffs and broader tariff threats against other commercial partners increased the demand for gold.
- Goolsbee of the Fed said that the latest tariff threats could delay feat cuts.
The price of gold (Xau/USD) extends its rise to around $ 3,365 during the first part of the Asian session on Monday. The precious metal advances as the operators rush towards the traditional assets of safe refuge after US President Donald Trump expanded the global trade war with a new wave of tariffs.
On Saturday, Trump said that the United States (USA) will impose a 30% tariff to the goods of the European Union (EU) and Mexico that will enter into force on August 1. Trump also announced a 35% tariff to Canadian imports and proposed a general tariff rate of 15% -20% to other commercial partners last week, along with a 50% tariff to copper imports. Concerns about the impact of Trump’s latest tariffs boost yellow metal as investors seek refuge for commercial tensions.
In addition, the persistent geopolitical tensions in the Middle East could contribute to the increase in gold. Reuters reported that at least eight Palestinians were killed and more than a dozen were injured while gathering water in the center of Gaza on Sunday. The Israeli army said the missile was destined to hit a militant of the Islamic jihad in the area, but that a malfunction had caused “dozens of meters of the target.” Steve Witkoff, sent from Trump for the Middle East, declared on Sunday that he was “hopeful” about the discussions of Alto El Fuego in Gaza that were being carried out in Qatar.
On the other hand, the caution posture of the US Federal Reserve (Fed) could limit the precious metal rise. It is widely anticipated that the US Central Bank will maintain stable interest rates while waiting to see the impact of tariffs on price pressures. Chicago Fed President Austan Goolsbee said that the new tariffs announced by Trump have further complicated the inflation perspectives, making it difficult to support the feats of rates that the president has requested.
GOLD – FREQUENT QUESTIONS
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.
