- The ingot goes back from a maximum of two weeks while the US House of Representatives approves a budget with a large debt load.
- A strong American dollar and a firmer S&P PMI affect the attractiveness of safe refuge.
- Geopolitical risks with Iran continue to support a long -term bullish bias for gold.
The price of gold fell around 0.48% on Thursday and failed to keep the figure of $ 3,300 after reaching a maximum of two weeks of $ 3,345. A strong US dollar presses the golden metal while the US treasure yields retreated from the maximum daily after the approval of Trump’s budget by the US House of Representatives of the USA, which will now be sent for approval to the Senate. The XAU/USD quotes at $ 3,289, with a 0.83%drop.
The mood on the market has improved slightly, but it is still fragile, since it was sponsored by the moody’s reduction to the US government debt. It is projected that the fiscal package approved so far by the lower US house of the US will add 4 billion dollars to the debt roof.
The US dollar index (DXY), which tracks the value of the dollar against a basket of six currencies, has reduced some of its previous weekly losses and has risen a modest 0.18% to 99.86, which represents an obstacle to the precious metal called in dollars.
However, the perspectives for the prices of the ingot remain optimistic due to geopolitical conflicts. The news agencies revealed that Israel is preparing to attack Iran’s nuclear facilities if the conversations between the latter and the US fail, according to Walla citing Fuentes.
In the data front, the indices of purchasing managers (PMI) of Global S&P in the US improved, indicating that the economy remains solid. Previously, the US Department of Labor revealed that the number of Americans who requested unemployment benefits decreased compared to the previous reading and below the forecasts.
Langotos merchants are attentive to the publication of housing data in the US and the Fed speakers on Friday.
Daily Gold Market Movements: Falls despite yields in the US registered in positive US data.
- The yields of the US Treasury bonds arrested their progress, with the 10 -year bonus yield falling three basic points (PB) to 4.55%. Meanwhile, the US real yields also drop four PB to 2.207%.
- Gold prices will probably continue to be supported by a negative feeling towards US assets, namely the dollar, shares and bonds. This was promoted by US controversial commercial policies, together with the moody’s reduction to the qualification of the US government of a negative AAA to AA1 stable and the approval of an US budget that will increase the deficit.
- The manufacturing PMI Flash of the US S&P global in May improved 50.2 to 52.3, exceeding the estimates of 50.1. The PMI Flash of services for the same period rose to 52.3, above the forecasts and the previous reading of 50.8.
- Initial unemployment applications in the US for the week that ended on May 17 increased by 227K, getting out of the 229K from the previous week and below the 230K forecasts, indicating that the labor market remains solid.
- The governor of the Fed, Christopher Waller, said the markets are monitoring fiscal policy. He added that if the tariffs are about 10%, the economy would be in good shape for the second semester, and the Fed could be in a position to cut later in the year.
- The data of the Chicago Commerce Board suggest that the operators are discounting 50.5 basic points of flexibility towards the end of the year.
Xau/USD technical perspective: it goes back below $ 3,300 while bulls take a break
The price of gold goes back from the weekly maximums below $ 3,300 as merchants take benefits and the demand for safe refuge assets has decreased. However, the general trend remains bullish, as confirmed by the relative force index (RSI), which remains above its neutral line of 50 despite leaning towards the negative side.
Therefore, the first resistance of the Xau/USD would be $ 3,300, followed by $ 3,345, the current weekly peak. Once exceeded, $ 3,400 would be the following objective, and with more force, $ 3,438, the maximum of May 7, would be the following.
For a bearish reversal, gold bassists must achieve a daily closure below $ 3,300. Once clear, the immediate support appears in a minimum daily of May 20, $ 3,204, before the simple mobile average (SMA) of 50 days at $ 3,191.
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.
