- Xau/USD shoots while Trump warns about 50% tariffs on EU imports, climbing the commercial war and increasing the demand for safe refuge.
- The US House of Representatives approves a budget with a debt of 4 billion dollars, with the vote of the Senate and the inflation data in the focus.
- Conversations about Ukraine and Iran relieve geopolitical stress, but markets are still reluctant to risk.
The upward trend of the gold price resumed on Friday, with the yellow metal, rising about 2% daily and 5% in the week, since the US dollar (USD) weakened even more after the US president, Donald Trump, climb the ‘commercial war’ with the European Union (EU). This and the concerns of investors on the US fiscal position boost the prices of upward gold, with the Xau/USD quoting $ 3,359 after bouncing from a minimum daily of $ 3,287.
Before the opening of Wall Street, Trump said the discussions with the EU “are not going anywhere” while threatening to impose 50% tariffs on EU imports on June 1. The secretary of the US Treasury, Scott Besent, also commented: “The president believes that the EU proposals have not been of the same quality as those we have seen of our other important commercial partners.”
Meanwhile, gold benefited from the approval of the ‘One Big Beautiful Bill’ of Trump in the US House of Representatives, which would add about 4 billion dollars to the US debt limit. The bill will be sent to the Senate for approval.
In the Geopolitical Front, Russia’s Foreign Minister said that the work in the memorandum that leads to a high fire in Ukraine is advanced. Meanwhile, USA and Iran concluded on Friday a fifth round of negotiations in Rome on the nuclear program in Tehran’s progress.
As for the data, US housing data in May were mixed, since construction permits collapsed, but sales of new houses improved in April. Meanwhile, a series of speakers of the Fed, led by Alberto Musalem of the Fed of St. Louis and Austen Goolsbee of the Chicago Fed, crossed the news.
Next week, the US economic agenda will include orders of lasting goods, the publication of the minutes of the last meeting of the Fed, the second estimate of GDP and the Personal Consumer Expenses Price Index (PCE) preferred by the Fed.
Movements of the daily gold market: It is triggered in the middle of risk aversion caused by Trump’s comments
- The yields of the US Treasury bonds arrested their progress, with the 10 -year Treasury bonus performance, almost three basic points (PBS) falling to 4,505%. Meanwhile, the real US also drops 2.4 PBS to 2,165%.
- The prospect of gold price is optimistic, given the fragile atmosphere of the market towards US assets caused by the growing fiscal deficit in the United States, which turned on the moody’s reduction of the debt of the US government of the US Government of AAA to AA1.
- The fiscal package approved by the US House of the US is projected that the debt limit will raise in 4 billion dollars.
- The US dollar index (DXY), which tracks the value of the dollar against a basket of six coins, sinks more than 0.66%, lowering to 99.24, a wind in favor for the precious metal called in dollars.
- Construction permits in the US fell from 1,481 million to 1,422 million, with a loss of 4% monthly. On the contrary, sales of new houses for the same period increased 10.9% monthly from 0.67 million to 0.743 million, the US Census Office revealed.
- Alberto Musalem of St. Louis said that companies are struggling to find out how to manage uncertainty about supply chains, inventory and inflation. Meanwhile, Goolsbee of the Chicago Fed said that the Fed needs to wait for the situation to clarify, the threshold for action is higher until that happens.
- Monetary markets suggest that operators are discounting 49.5 basic relief points towards the end of the year, according to Prime Market Terminal data.
Xau/USD technical perspective: jumps over $ 3,350 while the upward trend resumes
The price of gold extended its profits, ready to test the figure of $ 3,400 in the short term. The bullish impulse remains strong, as indicated by the relative force index (RSI), which points up with enough space before it becomes overcompared.
That said, the first resistance of the XAU/USD is $ 3,400, the maximum of May 7 in $ 3,438, followed by $ 3,450 and the historical maximum (AH) at $ 3,500.
On the bearish side, if gold falls below $ 3,300, a movement towards the minimum daily of May 20, $ 3,204, before the simple mobile average (SMA) of 50 days at $ 3,199.
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.
