- Xau/USD falls as the appetite improves for risk, operators expect Powell’s comments.
- Commercial conversations between the US and China are about to start in Switzerland, calming the markets and raising the US dollar.
- Despite correction, gold remains supported by global geopolitical risks and the purchase of central banks.
- The Fed is expected to keep the stable rates; Powell’s tone will guide the next policy movement.
Gold prices retreated more than 1.50% on Wednesday, driven by an improvement in appetite for risk after the announcement of tariff conversations between the United States (USA) and China. Meanwhile, the attention of the operators is at the Monetary Policy meeting of the Federal Reserve (FED) later in the day. The XAU/USD quote $ 3,384 after reaching a daily peak of $ 3,438.
On Tuesday, the news that US Treasury Secretary Scott Besent, and the Vice Primer Minister of China, He Lifeng, will meet in Switzerland calmed the fears of investors on the commercial war. Therefore, the dollar regained land as the operators took profits and bought the US dollar (USD) compared to their peers.
In spite of this, the prices of the ingot are ready to continue increasing in the midst of the geopolitical conflicts in progress between Russia and Ukraine, Israel and Hamas, and India and Pakistan.
Central banks continued to add gold to their reserves
The World Gold Council revealed that the Central Banks of China, Poland and the Czech Republic increased their bullion reserves in April.
The eyes of the operators are in the Fed, which is expected to keep the rates without changes for the third time in 2025 at 18:00 GMT. However, the focus will be in the comments of the president of the FED, Jerome Powell, at the press conference at 18:30 GMT.
Before the meeting, those responsible for policy expressed that the policy is appropriate to balance the double mandate of the Central Bank.
What moves the market today: the recovery of gold stops while central banks continue to add ingots to their reserves
- The recovery of the US dollar is a wind against the bullion prices. The US dollar index (DXY), which follows the value of the dollar against a basket of six currencies, rises 0.13% to 99.52.
- The stable yields of the US Treasury bonds have limited the rebound in gold price. The 10 -year Treasury bonus yield performance is still firm at 4,291%. Meanwhile, US real yields remain plans in 2,029%, as indicated by the yields of the treasure inflation to 10 years of 10 years.
- The World Council of Gold Council (WGC) revealed that the Popular Bank of China (PBOC) added 2 tons to its gold reserves in April, for sixth consecutive month. Krishan Gopaul, EMEA senior analyst at the WGC, added: “Net purchases accumulated to date now total 15 tons, helping to raise gold reserves to 2,294 tons.”
- The National Bank of Poland (NBP) increased 12 tons in April to 509 tons, while the Czech National Bank increased its reserves by 2.5 tons in April.
- Swaps markets have so far valued the first rate of 25 basic points (PBS) of the Fed for the July meeting, and expect two additional reductions towards the end of the year.
XAU/USD technical perspective: The price of gold trapped within the range of 3,350 $ -3,400 $
The price of gold goes back below $ 3,400, but is still upward. However, buyers must recover this level to be able to maintain the 3,450 $ brand. If these levels are exceeded, the bulls could test the historical maximum (ATH) of the 3,500 $.
On the other hand, if gold prices fall below $ 3,350, they could pave the way to test the minimum of May 1, $ 3,202. A fall below this level could challenge sellers to test the simple mobile average (SMA) of 50 days at 3,113 $.
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.
