- The price of gold continues to attract safe refuge flows amid persistent concerns about Trump’s commercial tariffs.
- Employment data in the US mostly positive and inflation concerns could allow Fed to keep stable interest rates.
- A modest strength of the US dollar could contribute to limit the rise of the XAU/USD torque.
The price of gold (Xau/USD) advances to the region of 2,880 $ during the Asian session on Monday in reaction to the plans of the US president, Donald Trump, to impose new tariffs of 25% on all imports of EE.UU steel and aluminum .. The announcement generates concerns about a global commercial war and benefits the precious metal of safe refuge. In addition, the expectations that Trump’s protectionist policies revive inflation turn out to be another factor that supports the status of raw material as coverage against the increase in prices.
Meanwhile, encouraging employment details in the US published on Friday and inflation concerns could limit the margin so that the Federal Reserve (Fed) relaxes even more. This, in turn, helps the US dollar (USD) to gain some positive traction at the beginning of a new week and could act as an obstacle to the price of gold. Apart from this, overcompra conditions in the daily chart could prevent operators from collaborating with new bullish bets around Xau/USD in the absence of relevant economic data of the USA ..
The price of gold is still well supported by concerns about a global commercial war
- The president of the US, Donald Trump, said on Sunday that he will introduce new 25% tariff which reinforces the price of safe refuge gold at the beginning of a new week.
- The Vice Minister of Foreign Affairs of Russia, Galuzin, said that there are no satisfactory proposals to initiate conversations about Ukraine, and that the statements of the West and Ukraine are nothing more than noise. It is assumed that US vice president, JD Vance, will go to Germany this week to expose the details of the US proposal.
- Investors are still concerned that Trump’s commercial policies can exert upward pressure on inflation in the US The margin of the Federal Reserve to relax even more and could limit yellow metal without performance.
- The monthly employment data in the US, very followed, showed that the largest economy in the world added 143,000 jobs in January compared to the 170,000 anticipated and the upward reading of the previous month of 307,000. This, however, was compensated by an unexpected fall in the 4.0%unemployment rate.
- The president of the Fed of Minneapolis, Neel Kashkari, said Friday that he would support more feats of fees if they see good inflation data and the labor market remains strong. Kashkari added that we are in a good place to wait until more information about Trump administration policies.
- The president of the FED of Chicago, Austan Goolsbee, said that the inconsistent policy approaches of the US government cause a high level of economic uncertainty that hinders those responsible for policies to determine where the economy is directed, and specifically the inflation.
- Meanwhile, the member of the Board of Governors of the FED, Adriana Kugler, said that the growth and economic activity of the US are healthy in general, but pointed out that progress towards the inflation objective of 2% has It was somewhat unequal. The recent progress in inflation is slow and unequal, Kugler added.
- A modest strength of the US dollar could stop the operators to carry out aggressive bullish bets around the raw material. The operators now expect the semiannual testimony of the president of the FED, Jerome Powell, before the congress and the inflation figures to the US consumer to obtain a new directional impulse.
Gold price bundles seem quite indifferent to the RSI overcapitted in the daily chart
From a technical perspective, the Relative Force Index (RSI) in the daily chart continues to show overcompra conditions, which justifies caution for bullish operators. This makes it wise to expect a short-term consolidation or a modest setback before positioning for an extension of the well-established bullish trend of the price of gold. Therefore, any subsequent movement will probably face a barrier near the region of 2,886- $ 2,887, or the historical peak, before the mark of $ 2,900.
Meanwhile, any corrective sliding below the immediate support of 2,855-2.854 $ could be seen as a purchase opportunity. This, in turn, should help limit the losses of the price of gold near the region of 2,834 $. However, some continuation sales could drag the Xau/USD even more towards the next relevant support near the area of ​​2,815-2.814 $ en route to the mark of $ 2,800.
US interest rates
Financial institutions charge interest rates on loans to borrowers and pay them as interest to savers and depositors. They influence the basic types of interest, which are set by central banks based on the evolution of the economy. Normally, central banks have the mandate to guarantee the stability of prices, which in most cases means setting as an objective an underlying inflation rate around 2%.
If inflation falls below the objective, the Central Bank can cut the basic types of interest, in order to stimulate credit and boost the economy. If inflation increases substantially above 2%, the Central Bank usually rises the interest rates of basic loans to try to reduce inflation.
In general, higher interest rates contribute to reinforce the currency of a country, since they make it a more attractive place for world investors to park their money.
The highest interest rates influence the price of gold because they increase the opportunity cost of maintaining gold instead of investing in an asset that accrues interest or depositing effective in the bank.
If interest rates are high, the price of the US dollar (USD) usually rises and, as gold quotes in dollars, the price of low gold.
The federal funds rate is the type to a day that US banks lend each other. It is the official interest rate that the Federal Reserve usually sets at its FOMC meetings. It is set at a fork, for example 4.75%-5.00%, although the upper limit (in this case 5.00%) is the aforementioned figure.
Market expectations on the interest rate of the Federal Reserve funds are followed by the Fedwatch of the CME tool, which determines the behavior of many financial markets in the forecast of future monetary policy decisions of the Federal Reserve.
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.
