- The price of gold rises to around $ 3,350 in the first Asian session on Tuesday.
- Trump threatened with secondary tariffs of 100% to Russia.
- The US IPC inflation data for June will be the culminating point later on Tuesday.
The price of gold (Xau/USD) gains land up to about $ 3,350 during the first Asian session on Tuesday. The precious metal advances in the midst of the demand for safe refuge after the threat of US President Donald Trump to impose 100% tariffs on Russia. All eyes will be placed in the inflation data of the US Consumer Price Index (IPC), which will be published later on Tuesday.
Trump, late on Monday, threatened to impose 100% tariffs on Russia if President Vladimir Putin does not accept an agreement to end his invasion of Ukraine in 50 days. The US president added that the encumbrances would be presented in the form of secondary tariffs, without providing details. Geopolitical risks could boost the price of gold, a traditional refuge asset, in the short term.
However, the caution posture of the Federal Reserve (FED) of the US could undermine the yellow metal. The president of the Fed, Jerome Powell, said he hopes that inflation will increase this summer as a result of tariffs, which is considered to keep the US central bank waiting until later in the year.
Meanwhile, the president of the Chicago Fed, Austan Goolsbee, said that the new tariffs announced by Trump have further complicated the inflation perspectives, making it difficult to support the feats of fees that the president has requested.
Gold operators expect US CPI data later on Tuesday, since they could offer some clues about the future path of interest rates in the US. Economists expect US inflation to have increased slightly last month. However, any sign of a smoother inflation than expected could raise the expectations of fed rate cuts, supporting the price of gold without performance.
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.
