Gold rallies with yields taking a step back
- Gold is printing another fresh all-time high at around $2,955.
- US President Donald Trump took markets by surprise when he mentioned a trade deal with China could be done.
- If US yields drop off further, expect to see more all-time highs in Gold this week.
Gold’s price (XAU/USD) is jumping again this Thursday while US yields are taking a step back together with a weaker Greenback. The precious metal trades around $2,955 at the time of writing. The push higher comes after United States (US) President Donald Trump said that a trade deal with China could be possible. Geopolitical concerns grew after US President Trump said Ukraine started the war with Russia and alluded it is time to repay the US for all the funding it provided.
Meanwhile, the Federal Reserve (Fed) Minutes from Wednesday overnight did not have much impact. Only a handful of Federal Open Market Committee (FOMC) members were advocating for a steady interest rate and no rush for any cuts. Considering this, chances for a June interest rate cut still stand.
Daily digest market movers: Geopolitics take over
- Thousands of Gold bars are being physically moved from the Bank of England's vaults to the US futures market, exposing logistical bottlenecks in the global market. The move is driven by an arbitrage opportunity created by speculation that US President Donald Trump will impose tariffs on Gold, with traders buying spot Gold in London and selling futures contracts in the US, Bloomberg supports.
- Gold Fields Ltd. said full-year profit surged 77% last year after the price of the precious metal soared, while the company started to overcome operational challenges at mines in Chile and South Africa, Reuters reports.
- The relationship between the US and Ukraine reached a new low on Wednesday in a social media frenzy between US President Donald Trump and Ukraine’s President Volodymyr Zelenskiy. There are growing concerns that Trump could halt American support for Ukraine after Russia invaded its neighbor in 2022. The US leader said on social media on Wednesday that Volodymyr Zelenskiy should “better move fast” to reach a deal with Russia “or he is not going to have a country left,” Bloomberg reports.
Technical Analysis: Let’s get to $3,000 and be done with it
It looks like even despite a softer tone on tariffs and with a possible trade deal between the US and China , traders will still have enough reasons to push XAU/USD further up. The path to $3,000 looks set and it is just a matter of time before Gold gets to it. As seen with several other asset classes, once the precious metal frenzy reaches the masses, it would be then the cue to sell.
The first support for this Thursday is located at $2,947, the first resistance, which coincides with Wednesday’s high. The daily pivot comes in at $2,933. Below there, the low of Wednesday and the S1 support are coming in at $2,919 and should be strong enough to support and brief selling pressure.
On the upside, the R2 resistance at $2,961 is the level to target for this Thursday. With a light economic calendar, there are great chances that the level will get tested later during the day. From there, the $3,000 handle comes in although it might be still a bit too high to get tested this week.
XAU/USD: Daily Chart
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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