- Gold has fallen almost 4% in two days, since the commercial agreement between the US and the United Kingdom drives appetite for the risk and demand of dollars.
- The DXY exceeds 100.00, rising 0.85% to 100.71, which weighs strongly on precious metals.
- The Fed remains firm and Powell points out patience while operators expect new comments from Central Bank officials on Friday.
The price of gold collapsed for the second consecutive day, since the operators erased the drop in the bullion on Tuesday, which pushed their profits beyond the figure of $ 3,400. The announcement of a commercial agreement between the US and the United Kingdom promoted the US dollar (USD) to the detriment of the Xau/USD, which lies at $ 3.311, with a fall of more than 1.60%.
An optimistic feeling is affecting gold prices, which have decreased almost 4% in the last two days. The announcement of a commercial agreement between the US and the United Kingdom, made by President Donald Trump and British Prime Minister Keir Starmer, has improved the mood of the market, since the operators seem confident that the US could reach more agreements. Meanwhile, all eyes are on Saturday’s meeting between the US and China delegations in Switzerland to discuss tariffs.
The news relieved concerns among investors seeking risk and led to US shares markets and the US dollar on the rise, which is bassist for the gold market.
The US dollar index (DXY), which tracks the value of the green ticket in front of a six -currency basket, exceeded the figure of 100.00 and rose 0.85% to 100.71, which represents an obstacle to the yellow metal.
As for data, the US economic agenda revealed that the labor market is still solid, a relief for the Federal Reserve (Fed), which maintained the rates without changes on Wednesday. At the same time, the president of the Fed, Jerome Powell, said he is in no hurry to reduce interest rates.
On Friday, a series of Fed officials will capture the headlines after the period of silence prior to the monetary policy meeting of May 7.
What moves the market today: gold retires as the US treasure yields increase
- The yields of the US Treasury bonds are rising after the FED decision on Wednesday. The 10 -year Treasury bonus yield from the US has risen ten basic points to 4,375%. Meanwhile, the US real yields have also raised ten basic points to 2,125%, as indicated by the yields of the US Treasury values protected against inflation at 10 years.
- The US macroeconomic data, as reported by the US Department of Labor, revealed that the initial applications of unemployment subsidy for the week that ended on May 3 increased by 228,000, below 230,000 expected and lower than the previous reading of 241,000.
- The World Gold Council revealed that the Central Banks of China, Poland and the Czech Republic increased their bullion reserves in April.
- The Popular Bank of China (PBOC) added 2 tons to its gold reserves in April, for sixth consecutive month. 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 stumbles and submerges below $ 3,400
The recovery of the price of gold stopped as the yellow metal retreated below the figure of $ 3,400 and opened the door to a prolonged fall of more than 1.60% or 50 US dollars. The impulse indicates that buyers are losing strength, as shown in the relative force index (RSI). This is negative for metal without yield, which is on the verge of immersing itself below $ 3,300, which could aggravate a fall towards the minimum of the May 1 cycle, $ 3,202.
On the contrary, if gold exceeds $ 3,350, this could push the Xau/USD back to $ 3,400.
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.
