- The DXY falls 0.32% to 100.31 while US yields decrease, increasing the attractiveness of assets without yield such as gold.
- Trump hints at an 80% tariff to China; Markets prepare for crucial commercial conversations in Switzerland.
- The Indian-Pakistan conflict intensifies, reinforcing the flows to safe shelters amid the global risk aversion.
The price of gold rose more than 1% on Friday while the US dollar (USD) retreated after registering two days of profits, affected by the decrease in US yields a deterioration in the appetite due to the risk promoted the prices of the ingot, which are being backed by geopolitical concerns. At the time of writing, the XAU/USD quotes at $ 3,338.
Wall Street records losses while operators prepare for the meeting between the delegations of China and the US in Switzerland on Saturday. Although expectations are high that the commercial war sustained by both countries could be broken down, investors remain cautious before conversations.
The president of the USA, Donald Trump, said that “an 80% tariff to China seems correct! Even Scott B,” through a social networks publication on Friday.
Langote prices remain high since hostilities between India and Pakistan have increased. Both countries accuse each other of using drones and artillery on the third day of the conflict.
The US dollar index (DXY), which tracks the value of the dollar against a basket of six currencies, exceeded the figure of 100.00 and is below 0.32% in 100.31, a tail wind for the yellow metal.
A group of federal reserve officials (FED) crossed the cables on Friday. Officials point out economic uncertainty and commercial policy risks, since US tariffs are prone to inflation and complicate the central bank’s task to balance their dual mandate objectives.
What moves the market today: the price of gold rises supported by low yields of US Treasury bonds.
- The yields of the US Treasury bonds are rising after the FED decision on Wednesday. The 10 -year Treasury bonus yield performance remains firm at 4,371%. Meanwhile, real US yields are also stable at 2.81%, as indicated by the yields of the US Treasury values ​​protected against inflation at 10 years.
- The World Gold Council revealed that 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 discounted the first rate of 25 basic points (PB) of the Fed for the July meeting, and they expect two additional reductions towards the end of the year.
Xau/USD technical perspective: The price of gold jumps again above $ 3,300
The recovery of the price of gold stopped while the yellow metal backed down below the figure of $ 3,400. However, the impulse indicates that buyers are intervening, as shown in the relative force index (RSI), suggesting that the metal without yield could prove the next key level of resistance at $ 3,350 on their way to $ 3,400.
On the contrary, gold could go back more at a daily closure below $ 3,300, which could expose the minimum of May 1, $ 3,202.
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.
