- Gold price struggles to capitalize on the previous day’s move higher amid mixed fundamental cues.
- Persistent US recession fears and Fed rate cut bets weigh on the USD, backing the XAU/USD pair.
- A positive risk tone caps the precious metal as traders keenly await the US PCE data on Friday.
Gold price (XAU/USD) trades comfortably above the $3,000 psychological mark for the second straight day on Wednesday, though it remains below the previous day’s swing high. Persistent uncertainty over US President Donald Trump’s so-called reciprocal tariff plans for next week continues to underpin the safe-haven bullion. Meanwhile, the US Dollar (USD) bulls remain on the defensive on the back of Tuesday’s disappointing US macro data and turn out to be another factor acting as a tailwind for the precious metal.
Adding to this, rising bets the Federal Reserve (Fed) will resume its rate-cutting cycle soon amid fears of a US recession lend additional support to the non-yielding Gold price. However, a generally positive risk tone acts as a headwind for the safe-haven XAU/USD pair. Traders also opt to wait for the release of the US Personal Consumption Expenditure (PCE) Price Index before positioning for any further gains. Nevertheless, the fundamental backdrop suggests that the path of least resistance for the bullion is to the upside.
Daily Digest Market Movers: Gold price draws support from trade jitters, dovish Fed expectations, and subdued USD demand
- The US Dollar retreated from a nearly three-week high after data released on Tuesday showed that the Conference Board’s US Consumer Confidence Index fell for a fourth straight month, to a four-year low level of 92.9 in March. The survey also revealed that the Expectations Index fell to 65.2, or the lowest level in 12 years and well below the threshold of 80 which usually signals a recession ahead.
- This comes after the Federal Reserve last week revised its growth outlook downward amid the uncertainty over the impact of US President Donald Trump’s trade policies. Moreover, reports that US reciprocal tariffs scheduled to be imposed on April 2 would be more targeted help ease inflation concerns and should allow the US central bank to keep cutting rates, benefiting the non-yielding Gold price.
- In fact, the Fed had signaled that it would deliver two 25 basis points interest rate cuts by the end of this year. The markets, however, are pricing in the possibility that the US central bank would lower borrowing costs in June, July, and October policy meetings. This overshadows hawkish remarks from Fed Governor Kugler, saying that she supports holding interest rates steady for some time.
- Meanwhile, Trump imposed a secondary tariff on Venezuela and said that any country that buys oil or gas from Venezuela would face a 25% tariff when trading with the US. Furthermore, Trump is expected to announce so-called retaliatory tariffs – that would offset levies on US goods and are set to take effect on April 2 – on about 15 major US trading partners, keeping investors on the edge.
- Russia and Ukraine have reached an agreement to halt military strikes in the Black Sea and on energy infrastructure following negotiations mediated by the US. Apart from this, the latest optimism over China’s stimulus aimed at boosting consumption remains supportive of a generally positive tone around the equity markets. This is holding back the XAU/USD bulls from placing aggressive bets.
- Traders now look forward to Wednesday’s release of US Durable Goods Orders, which, along with speeches by influential FOMC members, should provide some impetus to the USD and the commodity. The focus, however, will remain glued to the US Personal Consumption Expenditure (PCE) Price Index, which could provide cues about the Fed’s rate-cut path and drive the precious metal.
Gold price bulls could aim towards retesting the all-time peak, around the $3,057-3,058 area touched last week
From a technical perspective, bullish resilience near the $3,000 mark and the subsequent move up, along with positive oscillators on the daily chart, suggest that the path of least resistance for the Gold price is to the upside. Some follow-through buying beyond the overnight swing high, around the $3,036 area, will reaffirm the constructive outlook and lift the XAU/USD pair towards the all-time peak, around the $3,057-3,058 zone touched last week.
On the flip side, the $3,000 mark should continue to protect the immediate downside for the Gold price and act as a key pivotal point. A convincing break below might prompt some technical selling and drag the XAU/USD pair to the $2,982-2,978 region. The corrective fall could extend further toward the next relevant support near the $2,956-2,954 resistance breakpoint.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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