- The price of gold falls more than 1% to about $ 3,320 as the fire between Israel and Iran decreases the demand for safe refuge.
- Fed Bowman supports an interest rate cut in July in the midst of growing risks in the labor market.
- The US dollar sinks for the high fire between Israel and Iran and the moderate comments of Bowman of the Fed.
The price of gold (Xau/USD) collapses to about $ 3,320 during the European trading session on Tuesday. The yellow metal faces a strong sales pressure since shelter assets are low performance after the announcement of a high fire between Israel and Iran.
The president of the United States (USA), Donald Trump, has declared in a publication in Truth.Social that the two nations of the Middle East have agreed to stop the air war that lasts 12 days. “The stop the fire is already in effect. Please, do not violate it!” Trump wrote.
Meanwhile, Israeli Prime Minister Benjamin Netanyahu has warned that his defense forces will respond strongly if they will violate the truce.
However, investors expect the price of gold to receive support for a dramatic change in the Federal Reserve position (FED) on monetary policy perspectives. The Vice President of the Fed, Michelle Bowman, declared in a meeting in Prague on Monday that the settings in monetary policy are becoming appropriate in the midst of growing risks in the labor market and expectations that the tariff policy announced by Donald Trump will have a limited impact on inflation.
“If inflationary pressures remain contained, I [Michelle] I would support the reduction of the policy rate as soon as in our next meeting to bring it closer to its neutral configuration and maintain a healthy labor market, “said Bowman.
The lowest interest rates by the Fed are favorable for assets that do not generate performance, such as gold. Meanwhile, the moderate Fed position on monetary policy perspectives and the decrease in geopolitical tensions have strongly weighed over the US dollar (USD).
Technical Gold Analysis
The price of gold is quoted in an ascending triangle formation in a daily framework, indicating a contraction of volatility. The horizontal resistance of the aforementioned graphic pattern is drawn from the maximum of April 22 around $ 3,500, while the ascending trend line is placed from the minimum of April 7, 2,957 $.
The precious metal slides below the 20 -day exponential (EMA) mobile average, suggesting that the short -term trend has become uncertain.
The 14 -day relative force (RSI) index falls below 50.00, indicating that the impulse has moved down.
Looking up, the price of gold would enter an unexplored territory after breaking decisively above the psychological level of $ 3,500. Potential resistances would be $ 3,550 and $ 3,600.
Alternatively, a downward movement of the gold price below the minimum of May 29, $ 3,245 would drag it towards the round level support of $ 3,200, followed by the minimum of May 15 at $ 3,121.
Daily Gold Graph
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.
