Gold price consolidates near one-week top amid trade jitters, bearish USD
- Gold price holds steady near a one-week high, lacks bullish conviction.
- Trade war fears, Fed rate cut bets, and a bearish USD support the XAU/USD pair.
- A positive risk tone caps the commodity ahead of the US NFP report on Friday.
Gold price (XAU/USD) trades with a positive bias during the Asian session on Thursday and remains close to a one-week high touched on the previous day, though it lacks follow-through buying. Investors remain concerned about US President Donald Trump's tariff measures, which continue to act as a tailwind for the safe-haven bullion. Furthermore, the possibility of an earlier-than-expected interest rate cut by the Federal Reserve (Fed) and the bearish sentiment surrounding the US Dollar (USD) turn out to be other factors lending support to the non-yielding yellow metal.
However, a generally positive tone around the equity markets keeps a lid on any further gains for the Gold price. Traders also seem reluctant and opt to wait for the release of the closely-watched US monthly employment details – popularly known as the Nonfarm Payrolls (NFP) report – on Friday before placing fresh directional bets. Nevertheless, the fundamental backdrop and the recent price action suggest that the path of least resistance for the XAU/USD pair remains to the upside. Hence, any corrective slide might still be seen as a buying opportunity and remain limited.
Daily Digest Market Movers: Gold price bulls seem uncommitted amid positive risk tone
- US President Donald Trump's new 25% tariffs on most imports from Mexico and Canada took effect on Tuesday, along with the doubling of duties on Chinese goods to 20%.
- Canada announced retaliatory tariffs against more than $100 billion worth of US products, while China slapped tariffs of up to 15% on various US agricultural exports.
- In his first address to the US Congress, Trump said that further tariffs, including "reciprocal tariffs" would follow on April 2, raising the risk of an all-out trade war.
- Investors remain worried that Trump's tariffs could slow the US economic growth and force the Federal Reserve to cut interest rates multiple times by the end of this year.
- The bets were lifted by the Automatic Data Processing (ADP) report, which showed that US private sector employment grew by just 77K in February, vs 140K expected.
- Meanwhile, the economic activity in the US service sector continued to expand at an accelerating pace in February, though it did little to inspire the US Dollar bulls.
- The USD Index (DXY) drops to its lowest level since December 2024 and further acts as a tailwind for the Gold price during the Asian session on Thursday.
- The White House announced a one-month delay for US automakers to comply with the US–Mexico–Canada Agreement regarding the tariffs imposed on Mexico and Canada.
- This, in turn, boosts investors' appetite for riskier assets, which is holding back traders from placing aggressive bullish bets around the safe-haven XAU/USD pair.
- Investors now look to the usual Weekly Initial Jobless Claims data from the US for some impetus, though the focus remains on the US Nonfarm Payrolls on Friday.
Gold price needs to move beyond the $2,934 resistance for bulls to retain short-term control
From a technical perspective, momentum beyond the $2,934 immediate hurdle has the potential to lift the Gold price back towards the all-time peak, around the $2,956 area touched in February. Some follow-through buying would be seen as a fresh trigger for bullish traders and pave the way for an extension of a multi-month-old uptrend witnessed amid positive oscillators on the daily chart.
Meanwhile, the lack of follow-through buying warrants some caution before positioning for any further gains. That said, any corrective slide might still be seen as a buying opportunity near the $2,900 mark and remain limited. Some follow-through selling, however, could pave the way for deeper losses towards the $2,884-2,883 intermediate support en route to the $2,860-2,858 horizontal support.
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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