- The price of gold falls more than 1.50% by the tariff truce between the US and China and the change of capital related to risk assets.
- The US data show a slowdown in retail sales and mixed housing figures; Inflation expectations remain high.
- Fed officials remain cautious about cuts despite the progress in disinflation; Treasury yields bounce, supporting a stronger US dollar.
Gold prices fell more than 1.50% on Friday and are ready to close the week with losses of more than 4% as an improvement in the market mood led investors to sell the precious metal in favor of more risky assets. At the time of writing, the XAU/USD quote $ 3,187 after reaching a daily maximum of $ 3,252.
The ingot began the week down, since the news about a decala of the commercial war between the US and China and an agreement to reduce tariffs by 115% made gold collapsed. The US economic data (USA) revealed during the week that the Xau/USD quoted within the range of $ 3.120 to $ 3,265 during the last four days, but ultimately, buyers seemed to be losing impulse.
Previously, the data of the University of Michigan (UOM) showed that American homes had become pessimistic about the economy, as revealed in the May consumer’s feeling survey. Inflation expectations are rough biased. The previous housing data were mixed and import prices increased.
After the publication of the data, the Gold cut some of its losses as market participants incorporated more than 55 basic relaxation points by the Federal Reserve (Fed). However, as all the data would digest, the US treasure yields recovered their previous losses, and the US dollar became positive.
This is because US economic data this week have indicated continuous progress in the disinflation process. However, Fed officials remain cautious about the relaxation of politics, citing uncertainty about commercial policies and tariffs and their possible impact on inflation.
On the growth side, retail sales continued to decelerate in April, but the last update of the Atlanta Fed GDPnow suggests that the US economy could grow at a rate of 2.4% in the second quarter of 2025.
Next week, the US economic agenda will have a series of Fed speakers, as well as preliminary PMIS and housing data, which will be observed closely.
What moves the market today: gold remains stable while bad consumer data of the US consumer drives the USD
- The feeling of the consumer of the University of Michigan in May fell to its lowest level since July 2022, in 50.8, below the estimates of 53.8, going down from April 52.2. The inflation expectations of the Americans for next year increased from 6.5% to 7.3%, and for the next five years they jumped from 4.4% to 4.6%.
- The beginnings of construction in the US increased by 1.6% intermensual, from 1,339 million to 1,361 million, below the estimates. Construction permits for the same period collapsed -4.7% after registering an increase of 1.9% in March.
- Import prices in the US expanded 0.1% intermensual, above forecasts and the fall of -0.4% of March.
- Washington and Beijing announced a 90 -day break earlier this week to work on the details of ending their commercial war of reprisals.
- The yields of the US Treasury bonds erased their previous losses, with the 10 -year Treasury bonus yield plane in around 4,437%. Meanwhile, real US yields are also consolidating at 2,0907%.
XAU/USD technical perspective: double roof at risk of being canceled
As I wrote yesterday, “the gold rebound could be ephemeral if buyers fail to close above $ 3,200.” Although it was achieved, the sellers intervened, dragging the Xau/USD below this level and confirming that the “double roof” is still at stake. The impulse favors a greater decrease, since the relative force index (RSI) remains bassist.
Therefore, if the Xau/USD remains below $ 3,200, the next support level would be the simple mobile (SMA) of 50 days at $ 3,155, followed by $ 3,100. On the other hand, if gold exceeds $ 3,200, the following resistance would be the peak of May 14, $ 3,257 before $ 3,300.
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.
