- Gold fails to benefit from a weaker USD while markets expect the next PPI and US retail sales in search of clues about inflation.
- The appetite for risk improves by US commercial diplomacy; The flows to secure shelter assets fader, leading to gold to its lowest level since April 11.
- The increase in the yields of the US Treasury bonds and the cautious posture of the Fed reduce bets on aggressive rate cuts.
The price of gold collapsed for the second day on three on Wednesday, mainly driven by an improvement in appetite for risk after positive commercial news related to the United States (USA). This, together with a bassist technical graphic pattern, pushed the yellow metal below the figure of $ 3,200 for the first time since April 11.
At the time of writing, the Xau/USD is quoted at $ 382, ​​with a fall of more than 2%, since the truce in the commercial war between Washington and Beijing has raised the mood of the traders in the midst of some uncertainty over global economic perspectives.
The tour of the US president, Donald Trump, through the Middle East has maintained the mood of the positive market while achieving agreements with several countries. The news that the agreements with Japan and South Korea seem to be close to the linging attractiveness, since investors move capital to more risky assets.
This has affected metal without yield, which has failed to capitalize on the weakness of the US dollar, since rumors circulated that the Trump administration favors a weaker dollar. Reports suggested that the White House could press other countries to let their coins be appreciated.
The yields of the US Treasury bonds rose abruptly on Wednesday, despite the fact that the latest inflation report showed that price measures in April remained unchanged in annual terms compared to the March figures.
Usually, the lowest inflation environments promote central banks to make monetary policy more flexible. However, the position of waiting and seeing the Federal Reserve (Fed) was reaffirmed even more by officials who appeared in the news since last Friday. This led investors to reduce their bets that the Fed would lower rates twice instead of three.
Facing this week, traders are attentive to the publication of the Producer Price Index (PPI) and US retail sales data.
What moves the market today: the price of gold goes back pressured by the high yields of the US Treasury Bonds.
- The yields of the US Treasury bonds are rising, with the 10 -year treasure note, increasing 5.5 basic points up to 4,526%. Meanwhile, real US yields are also increasing to 2,234%, rising five PB as indicated by the yields of the US treasure values ​​protected against inflation at 10 years.
- The US CPI in April expanded a 2.3% year -on -year, a tenth below the estimates and reading of the previous month, and the underlying metrics remained unchanged by 2.8% interannual.
- The tariff agreement between the US and China improved the appetite for risk and sent the downward ingot prices. However, traders must be attentive to recent developments on US commercial policies and geopolitics, since new catalysts could arise and push gold prices in any direction.
- The US Producer Price Index (PPI) is expected to rise from -0.4% to 0.2% intermenual. The underlying PPI, which excludes volatile elements, is projected to increase 0.3%, rising from -0.1%.
- The US retail sales are also being observed for April, with economists projecting a 0% increase, lowering an intermensual 1.5% expansion in March.
Xau/USD technical perspective: The price of gold will withdraw around $ 3,000 as a double ceiling pattern emerges
The update of the price of gold has stopped due to the formation of a graphic pattern of ‘double ceiling’. Although the Xau/USD fell below $ 3.202, sellers must protect this level at all costs. If they succeed, the yellow metal could slide towards the next key levels of support in the simple mobile average (SMA) of 50 days of 3,150 $, followed by the figure of $ 3,100. In case of more weakness, the following objective would be $ 3,000, followed by the objective of the “double roof” in 2,950 $.
On the contrary, if the Xau/USD exceeds $ 3,200, buyers will face the following resistance at $ 3,250. If it is exceeded, the next ceiling level would be $ 3,300 and beyond.
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.
