- The price of gold recovers positive traction after the night setback from a maximum of several weeks.
- Fed rate cuts bets and US fiscal concerns limit the recovery of the USD and benefit the Xau/USD pair.
- Geopolitical risks and persistent uncertainties related to trade further support raw material.
The price of gold (Xau/USD) attracts some buyers at lower levels during Wednesday’s Asian session and reverses part of the backward slide from the previous day from a maximum of almost four weeks. The US dollar (USD) struggles to capitalize on the good rebound on Tuesday from a minimum of six weeks amid the growing acceptance that the Federal Reserve (Fed) will cut even more interest rates against relief signs in inflationary pressures. This, in turn, helps yellow metal not profitable to recover positive traction.
Apart from this, the persistent geopolitical risks and the uncertainties related to trade turn out to be other factors that act as a tail wind for the price of safe refuge gold. However, Xau/USD bulls could refrain from aggressive bets before a possible call between US president Donald Trump and his Chinese counterpart Xi Jinping. This, together with a generally positive tone around the variable income markets, should contribute to limiting the profits of the raw material before important macroeconomic publications of the USA.
What moves the market today: the price of gold obtains support from a combination of factors
- The job and labor rotation opening report (Jolts) published on Tuesday showed that there were 7.39 million job offers on the last business day of April. Reading exceeded 7.1 million expectations and also exceeded 7.2 million offers registered in March. The data point to the continuous resilience of the US labor market and reinforce optimism on the health of the economy.
- Despite the encouraging data, the US dollar faced some pressure due to the fall of the yields of the US Treasury bonds and the bets that the Federal Reserve (FED) will make at least two cuts of 25 basic points by the end of this year. In addition, the concerns that the US budget deficit could worsen at a faster rate than expected due to the tax and expenses bill of President Donald Trump weigh on the dollar.
- The president of the Atlanta Fed, Raphael Bostic, said Tuesday that it is ‘very cautious’ regarding cutting fees and that the best monetary policy approach now implies ‘patience’. Bostic added that there is still a way to go in inflation, since underlying prices remain a problem and that the recession is not in its forecast at this time, although it sees a possible path to a rate cut this year, depending on the economy.
- Meanwhile, the president of the Chicago Fed, Austan Goolsbee, said that a deceleration related to tariffs may not appear for a while in the data. All indicators point to a stable and complete job and we must wait to see if the tariffs have a large or small inflationary impact, Goolsbee added.
- Separately, the member of the Board of Governors of the FED, Lisa Cook, said that commercial policy is now affecting the economy and can make it difficult to reduce inflation. Cook awaits an increase in inflation and a reduction in activity due to tariffs and warned that tariffs could lead to a stagning environment. The Fed monetary policy is well positioned for a variety of scenarios, added Cook.
- Trump and Chinese President Xi Jinping are expected to maintain a call this week, probably on Friday, in the midst of renewed fears of a commercial war between the two largest economies in the world. In addition, the increase in tariffs on the import of steel and aluminum from 25% to 50% will enter into force on Wednesday. This maintains the risk related to trade in play and offers some support for the price of safe refuge gold.
- The operators now expect the publication of the US ADP Report on employment in the private sector and the US ISM Services PMI. However, the approach remains focused on monthly employment data, popularly known as the Non -Agricultural Payroll (NFP) report.
Gold price bundles could now wait a movement beyond the immediate obstacle of $ 3,380
From a technical perspective, the appearance of purchases at lower levels on Wednesday occurs on this week’s breakout through the barrier of 3,324-3.326 $. In addition, oscillators in daily/hour graphics remain comfortably in positive territory and suggest that the road of lower resistance for the price of gold is upwards. However, any later movement could face some resistance near the 3,380 $ region before the neighborhood of $ 3,400 or a maximum of several weeks reached on Tuesday. A sustained strength beyond the latter should allow the Xau/USD to try again the historical maximum achieved in April and make a new attempt to conquer the psychological brand of 3,500 $.
On the contrary, the weakness below the area of ​​3,355 $ could continue to attract some buyers at lower levels and it is more likely to remain limited near the mentioned resistance break, around the 3,326-3.324 $ area. However, some continuation sales could make the raw material vulnerable to weakening even more below the $ 3,300 mark and test the horizontal support of 3,286-3.285 $.
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.
