- The price of gold continues to attract safe refuge flows in the midst of growing geopolitical tensions.
- The intimate movement seems not to be affected by the appearance of some USD purchases.
- The operators expect with interest the key monetary policy meeting of the FOMC of two days that begins this Tuesday.
The price of gold (Xau/USD) attracts some buyers of continuation for the second consecutive day and jumps to a maximum of almost two weeks, around the area of 3,381-3,382 $ during the Asian session on Tuesday. Despite the relaxation signs of commercial tensions between the US and China, investors remain in tension after the erratic commercial policies of US President Donald Trump. Apart from this, the persistent geopolitical risks derived from the prolonged war between Russia and Ukraine and conflicts in the Middle East increase the demand for the precious metal of safe refuge.
Meanwhile, the strong intimate movement seems to be quite inapted by the appearance of some purchases of the US dollar (USD), which tend to undermine the price of gold. This, in turn, favors the upward operators and suggests that the road of lower resistance for the Xau/USD is upward. However, investors could refrain from aggressive bets and choose to wait for more signs about the future trajectory of federal reserve rates (Fed). Therefore, the attention will remain focused on the result of the MONETARY POLICY meeting of the FOMC of two days on Wednesday.
What moves the market today: the bulls of the price of gold regain control while geopolitical risks counteract the hopes of a commercial agreement between the US and China
- Talking to reporters aboard Air Force One on Sunday, US President Donald Trump hinted at possible commercial agreements with certain countries as soon as this week, although he did not appoint any specific country. Trump had previously pointed out that he is open to reduce the huge tariffs imposed on China.
- Meanwhile, the China Ministry of Commerce said last Friday that it was evaluating the possibility of commercial conversations with the US, in turn, it adds optimism about a possible relief of the tariff war between the two largest economies in the world and remains favorable to a generally positive risk tone.
- The survey of the Supply Management Institute (ISM) showed on Monday that the growth in the US services sector accelerated in April. In fact, the ISM services PMI rose to 51.6 compared to 50.8 in March and 50.6 estimated. This adds to the encouraging US employment data on Friday and relieves the fears of a recession in the US.
- This helps the US dollar to earn some positive traction after a two -day run. However, the price of gold continues to attract safe refuge flows in the midst of uncertainty about Trump’s erratic commercial policies and the increase in geopolitical risks. Trump announced on Sunday a 100% tariff on films produced abroad.
- In the geopolitical front, Russian officials said that Ukraine launched drones on Moscow for the second consecutive night, which forced the closing of the three main airports of the capital. In addition, the Ukrainian forces were trying to advance in Kursk and attacked an electrical substation in the western region of Kursk in Russia.
- In addition, Israel, supposedly in coordination with the USA, launched air attacks in the port of Hodeidah in Yemen in response to the ballistic missile attack of the Houthi rebels that hit the Ben Gurion International Airport on Sunday. This, in turn, provides an additional impulse to the merchandise on Tuesday.
- The operators now wait with interest in the very anticipated monetary policy meeting of the two -day FOMC that begins this Tuesday in a reduced bets for a rate cut in June. Therefore, the accompanying policy statement and the comments of the president of the Federal Reserve, Jerome Powell, on Wednesday will be examined in search of clues about the trajectory of feat cuts.
The price of gold could accelerate the positive impulse beyond $ 3,400 once the 61.8% fibonacci barrier is exceeded
From a technical perspective, the strong intimate movement increases the price of gold beyond the $ 3.350 barrier, which coincided with the Fibonacci setback level of 50% of the recent fall from the historical maximum. This, together with positive oscillators in the daily chart, suggests that the road of lower resistance for the merchandise is still upwards. Some purchases of continuation beyond the level of 61.8% of Fibonacci, around the 3,385 $ region, will reaffirm the positive bias and raise the Xau/USD beyond the 3,400 $ brand, towards the next relevant barrier near the 3,425 $ zone. The subsequent movement should allow the bullies to make a new attempt to conquer the psychological brand of $ 3,500.
On the contrary, the $ 3,350 zone now seems to protect the immediate fall before the minimum daily, around the $ 3.325 area. This is followed by the $ 3,300 mark, which if it is broken decisively could cause some technical sales and drag the price of gold towards the intermediate support of 3,275-3.270 $ en route to the region of 3,245-3.244 $. A convincing rupture below the latter could make the XAU/USD vulnerable to accelerate the fall again towards the challenge of the 3,200 $ brand, or below a minimum of two weeks reached last Thursday.
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.
