Gold consolidates further while chances for new all-time highs this week start to fade
- Gold faces some further pressure after the Trump administration loosens tariff pressure for Mexico and Canada.
- US yields have recovered a touch while Fed’s Waller sees chances for two or even three rate cuts this year.
- Traders brace for the Nonfarm Payrolls release for February this Friday.
Gold’s price (XAU/USD) stabilizes and seems to be consolidating for the third day in a row this week. The rally in Bullion stalls after US President Donald Trump shielded off all goods from Mexico and Canada that fall under the USMCA trade agreement from its freshly baked tariffs that got implemented earlier this week. Meanwhile, US equity markets trade below where they were on President Trump’s inauguration day.
On the rates side, traders got some support from Federal Reserve (Fed) official Christopher Waller, who said on Thursday that he wouldn’t support lowering interest rates in March but sees room to cut two, or possibly three, times this year. This coincides with what markets expected, with June being the first pivotal moment for the Fed to cut interest rates this year.
Daily digest market movers: Fed’s on board
- Tensions rise between the world’s two largest economies, the US and China. Chinese Foreign Minister Wang Yi defended his nation’s actions on stemming the flow of fentanyl to the US on Friday at a high-profile briefing and accused US President Donald Trump of using the issue as a pretext to pressure his government, Bloomberg reports.
- Anticipations were high for the crypto industry after President Donald Trump signed a long-awaited order creating a strategic Bitcoin reserve and an additional stockpile of other digital assets. However, Bitcoin tanked below $90,000 after it turned out that only already owned tokens would be centralized and no new Bitcoin would be bought with taxpayers’ money, Bloomberg reports.
- “If the labor market, everything, seems to be holding, then you can just kind of keep an eye on inflation,” Fed’s Waller said on Thursday at the Wall Street Journal CFO Network Summit. “If you think it’s moving back towards the target, you can start lowering rates. I wouldn’t say at the next meeting, but could certainly see going forward.”, Waller added, Reuters reports.
- Australia shipped a record amount of Gold to the US in January, as fears over potential tariffs saw traders rush to deliver metal into New York warehouses in order to capitalize on extreme price dislocations between key markets. Exports to the US totaled A$4.6 billion ($2.9 billion) in the month — the highest amount in records dating back to 1995, the Australian Bureau of Statistics said in its latest monthly trade report, Bloomberg reports.
Technical Analysis: Equilibrium for now
Bets on interest rate cuts by the Federal Reserve are now starting to get support from the central bank’s policymakers. This should support Gold’s price throughout the year, though it might not be enough to push Gold to fresh all-time highs for now. For that, a fresh catalyst, such as new tariffs or another page in the trade war book, would need to occur.
While Gold trades near $2,917 at the time of writing, the daily Pivot Point at $2,910 and the daily R1 resistance at $2,928 are the key levels to watch for on Friday. In case Gold sees more inflows, the daily R2 resistance at $2,945 will possibly be the final cap ahead of the all-time high of $2,956 reached on February 24.
On the downside, the $2,900 psychological big figure and the S1 support at $2,893 acts as a double support barrier. If Bullion bulls want to avoid another leg lower, that zone must hold. Further down, the daily S2 support at $2,874 should be able to catch any additional downside pressure.
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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