- Gold is traded at $ 3,000 at the beginning of this week after registering a new historical maximum on Friday.
- Operators prepare for a week full of events with geopolitics and the decision of the Federal Reserve.
- Gold could reach $ 3.020 in the short term, with UBS joining BNP in its projections of $ 3,200.
The price of gold (Xau/USD) is traded just at $ 3,000 at the time of writing on Monday, after the correction promoted by the benefits of Friday after reaching a new historical maximum of $ 3,005. The operators are preparing for a fairly moved week, with the German Bundestag scheduled to vote the defense spending plan, which would boost the European industry in 1 billion euros, on Tuesday. That same day, the president of the United States (USA), Donald Trump, is scheduled to meet with the Russian president, Vladimir Putin, to discuss a possible peace agreement for Ukraine.
As if that were not enough, the US Federal Reserve (FED) and its Federal Open Market Committee (FOMC) will meet on Tuesday and Wednesday before issuing their last decision on monetary policy. The operators will be eager to see how each member of the FOMC will vote and what future orientation will be reflected in the points graph (Philips). There are no changes in monetary policy, while the expectations of a rate cut in May or June increase and decrease constantly day by day.
What moves the market today: crucial week
- President Trump said he will talk to Russian President Vladimir Putin on Tuesday while the US presses for an end to the fighting in Ukraine and European nations rush to reinforce their support for Kyiv, Bloomberg reports. Trump confirmed that the discussion will be on territory and the division of certain assets, and there is “a very good possibility” of an agreement.
- UBS Group AG became the last bank to raise its pricing for gold prices in the face of increasing the possibilities of a prolonged global commercial war, a scenario that analysts expect it to continue to boost investors to acquire more of the active precious refuge. UBS sees the same level as BNP, with gold quoting at $ 3.200 in the second quarter.
- The CME Fedwatch tool sees a 99.0% probability that there are no changes in interest rates at the Fed next meeting on Wednesday. The possibilities of a rate cut at the May 7 meeting are currently 27.5%.
Technical analysis: starting point at $ 3,000
The 3,000 $ brand is now the main beacon forward and needs to stay at some point. Given the strong climb to a new historical maximum last week, it is still quite good for the precious metal to fall briefly below this level and allow operators to re -enter a lower price. Once the level of $ 3,000 begins to stay and does not allow any excursion below, the operators can prepare for $ 3,100 and $ 3,200 in a couple of weeks or months.
The new historical maximum of $ 3.004 reached on Friday is the first level to be overcome once the $ 3,000 is recovered. That mentioned psychologically important level of $ 3,000 faces a double challenge on Monday, with resistance R1 in 2,999 $ to reinforce this area. Intradía operators could use this area to take some profits, since the R2 resistance in 3.015 $ seems a bit distant for the day.
In the lower part, the daily pivot point in 2,989 $ has provided a wide support to avoid downward slides in the day. In the event that the gold went back below that level, look for the S1 support in 2,973 $ and the S2 support in 2,962 $ in the lower part.
Xau/USD: Daily graphic
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.
