- The price of gold extends the correction and falls almost 1% in the first European operations on Thursday.
- The United Kingdom and the US are ready to announce a commercial agreement that would avoid the implementation of US tariffs.
- Gold sees a safe refuge exit with the assumption that more agreements will follow.
The gold (Xau/USD) extends the correction of the previous day and falls almost 1% to $ 3,333 at the time of writing this article on Thursday, since the feeling of risk improves, with the president of the USA, Donald Trump, expected to announce a commercial agreement with the United Kingdom at a press conference at 2:00 p.m. GMT in Washington, according to people familiar with the matter. Meanwhile, the United Kingdom Administration has confirmed to Bloomberg and the Financial Times to announce an agreement. The details about that commercial agreement are still unconfirmed.
An additional engine during the night was the decision of interest rates of the Federal Reserve (FED) and the comments of the president of the FED, Jerome Powell. The main conclusion of Powell’s words was that the US economy is showing signs of resilience for now. However, Powell hopes that the real impact of tariffs and augmented uncertainty affect economic numbers later this year. The Central Bank maintained interest rates without changes in the range of 4.25%-4.50%, confirming the assumption of markets, as seen in the Fedwatch tool, that a rate cut is not expected until summer.
What moves the market today: the funds are not finished the gold rally
- In the Asian trading session, before the commercial agreement was issued, the price of gold was rising, after falling on Wednesday when the Federal Reserve kept interest rates, and President Jerome Powell said that the Central Bank is not in a hurry to cut despite the uncertainty of the commercial war, Bloomberg reports.
- That the gold fever is not over, even with a possible initial commercial agreement, it can be seen in the statements of several coverage funds. This Thursday, Waatah Capital Advisors Ltd. reported that he is betting on gold to increase their yields this year, since investors are turning to the asset to protect their wealth during the global commercial war, Bloomberg reports.
- “Great press conference tomorrow morning at 10:00 EDT (14:00 GMT), at the Oval Office, on an important commercial agreement with representatives of a large and highly respected country. The first of many!” President Trump wrote on his social media platform “Truth Social”, reports The New York Times.
Technical analysis of the price of gold: conversations with instantaneously large questions
Do not celebrate with champagne even with this initial commercial agreement between the United Kingdom and the US. Euphoria is taking place in the markets following these holders, although the first element that cuts the atmosphere is that the United Kingdom is in fact a large economy, although with the least exposure to the US. That an agreement is being closed so quickly means that it will probably only be in a segment, or an agreement in principle.
The price of gold initially quoted update this Thursday, facing a rejection in resistance R1 about $ 3,413. If the signing of the agreement is delayed, or if the real agreement is just a simple makeup, expect an immediate reaction with the gold quickly returning to that level. Once there, it is not far from R2 resistance at $ 3,462.
At the bottom, the S1 support at $ 3,338 is being tested at the time of writing. Below, the S2 support is at $ 3.311, although technically it has no other relevance in addition to being a daily pivotal level. The level of surveillance, which is about $ 3,245, is a much stronger floor from a technical point of view.
Xau/USD: Daily graphic
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.
