- Gold price attracts some dip-buyers following a modest Asian session slide to the $3,275-3,275 area.
- The optimism over the US-UK trade deal and the US-China negotiations might cap the precious metal.
- The Fed’s hawkish pause lifts the USD to a multi-week top and further keeps a lid on the commodity.
Gold price (XAU/USD) reverses an Asian session dip to a multi-day low and climbs back above the $3,300 round-figure mark in the last hour, though the upside potential seems limited. Persistent geopolitical risks stemming from the Russia-Ukraine war, the escalation of tensions in the Middle East, and the India-Pakistan border act as a tailwind for the safe-haven precious metal. However, the latest optimism fueled by the US-UK trade deal and the start of US-China tariff negotiations over the weekend caps the upside for the commodity.
Meanwhile, hopes that the US will strike more trade deals with other countries ease US recession fears. Adding to this, the Federal Reserve’s (Fed) hawkish pause on Wednesday lifts the US Dollar (USD) to a nearly one-month high. This might further contribute to keeping a lid on any meaningful appreciating move for the non-yielding Gold price. Traders now look forward to speeches from influential FOMC members for some impetus. Nevertheless, the XAU/USD seems poised to post modest gains for the first time in three weeks.
Daily Digest Market Movers: Gold price bears seem reluctant to place aggressive bets amid geopolitical risks
- US President Donald Trump and British Prime Minister Keir Starmer announced a limited bilateral trade deal on Thursday that leaves in place a 10% tariff on goods imported from the UK. Adding to this, US Commerce Secretary Howard Lutnick told CNBC that Washington will roll out dozens of trade deals over the next month, though a 10% tariff imposed on most countries will likely stay.
- Furthermore, the Trump administration is reportedly considering lowering the tariffs on China to 50% from 145% as soon as next week, which adds to the market optimism and might cap the XAU/USD pair. US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer are set to meet their Chinese counterparts in Switzerland on Saturday to discuss trade and economic issues.
- The Federal Reserve indicated on Wednesday that it is not leaning towards cutting interest rates anytime soon despite the increasing uncertainty about the economic outlook. This allows the US Dollar to build on its recent bounce from a multi-year low and climb to a four-week top during the Asian session on Friday, and contributes to driving flows away from the non-yielding Gold price.
- Russia and Ukraine both reported attacks on their forces on the first day of a three-day unilateral ceasefire called by Russian President Vladimir Putin. Furthermore, Israel’s escalation with Iran-backed Houthis in Yemen and fears of a wider military conflict along the India-Pakistan border keep geopolitical risks in play. This, in turn, could lend some support to the safe-haven precious metal.
- A slew of influential FOMC members are due to speak on Friday. Investors will look for more cues about the Fed’s future rate-cut path, which, in turn, will play a key role in driving the USD demand and provide a fresh impetus to the commodity, which remains on track to post modest weekly gains.
Gold price needs to weaken below the $3,265-3,264 area to support prospects for further depreciating move
From a technical perspective, the overnight breakdown through the $3,260 resistance-turned-support and the subsequent slide below the $3,300 mark on Friday favors the XAU/USD bears. However, oscillators on the daily chart – though they have been losing traction – are yet to confirm the negative bias. This, in turn, warrants some caution before positioning for deeper losses and suggests that the Gold price could find some support near the $3,265-3,264 horizontal zone. Some follow-through selling, however, should pave the way for a fall towards the $3,223-3,222 intermediate support en route to last week’s swing low, around the $3,200 neighborhood.
On the flip side, the Asian session high, around the $3,324 region, now seems to act as an immediate hurdle. Any further move up could attract some sellers and cap the Gold price near the $3,360-3,365 static resistance. A sustained strength beyond the latter should allow the XAU/USD pair to reclaim the $3,400 mark and climb further towards the next relevant hurdle near the $3,434-3,435 area, or the weekly swing high.
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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