- The gold corrects down after registering impressive profits last week.
- USA announced an exemption for electronic devices of reciprocal tariffs.
- The feeling of the market remains optimistic on Monday after the volatile action of last week.
The price of gold began the week with a small bearish hole, but managed to recover its traction during Asian negotiation hours. After touching a new historical maximum of $ 3,245, the Xau/USD entered a consolidation phase and descended to $ 3,200. At the time of publication, the pair was quoted at $ 3.208, losing about 1% in the day.
The price of gold goes back as the feeling of risk improves
Gold won almost 2% on Friday, since surely refuge flows dominated the action in financial markets after China announced that additional tariffs on US imports increased to 125% from 84% in retaliation.
On Friday afternoon, the administration of US President Donald Trump said he decided to grant some exemptions to imports of electronic devices, including smartphones, computers and laptops, of the high additional tariffs of 125% imposed on China. Trump clarified that these products will remain subject to existing tariffs of 20%, which were initially imposed due to the fentanyl crisis in the US.
During the weekend, US Secretary of Commerce, Howard Lutnick, said technology imports, along with semiconductors, will face new separate levies within the next two months.
These developments helped improve market feeling on Monday, which caused gold to experience a downward correction. Reflecting the positive risk atmosphere, the futures of the US stock indices win between 1.1% and 2% in the face of the opening of Wall Street.
The economic calendar will not have any high -level data publication in the American session. Investors will pay close attention to the comments of the Federal Reserve officials. In addition, Trump is expected to share additional details about commercial policy in semiconductors.
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.
