Gold price remains confined in familiar trading range above $2,900 mark
- Gold price extends its sideways consolidative price move during the Asian session on Monday.
- Worries about Trump‘s trade policies and Fed rate cut bets continue to support the commodity.
- The USD languishes near a multi-month low and further acts as a tailwind for the XAU/USD pair.
Gold price (XAU/USD) continues with its struggle to gain any meaningful traction during the Asian session on Monday and remains confined in a familiar range held over the past week or so. The downside, however, remains cushioned amid fears of a global trade conflict, which continues to offer support to the safe-haven bullion. Furthermore, the growing acceptance that the Federal Reserve (Fed) will cut interest rates multiple times this year, bolstered by Friday's weaker US jobs data, turns out to be another factor acting as a tailwind for the non-yielding yellow metal.
Apart from this, worries that Trump's trade policies will hit US economic activity keep the US Dollar (USD) depressed near its lowest level since November and suggest that the path of least resistance for the Gold price is to the upside. That said, the lack of any buying interest warrants some caution before placing fresh bullish bets around the XAU/USD pair and positioning for the resumption of the strong uptrend from the December 2024 low. Nevertheless, the fundamental backdrop suggests that any corrective slide could be seen as a buying opportunity and remain limited.
Daily Digest Market Movers: Gold price bulls remain on the sidelines despite a combination of supporting factors
- The uncertainty surrounding US President Donald Trump's trade policies keeps investors on the edge and continues to act as a tailwind for the Gold price at the start of a new week. Moreover, investors remain worried that Trump's protectionist tariffs could slow the US economic growth and force the Federal Reserve to resume its rate-cutting cycle in June.
- In fact, Trump took another pivot on his tariff agenda and said that impending tariffs on Canada may or may not come on Monday, or on Tuesday. This comes a day after the Trump administration temporarily waived off the 25% steep tariffs on goods from Canada and Mexico that comply with the US–Mexico–Canada Agreement for a month.
- Fed Chair Jerome Powell said on Friday that the uncertainty around Trump Administration policies and their economic effects remains high. Separately, San Francisco Fed President Mary Daly said late Sunday that rising uncertainty among businesses could dampen demand in the US economy but does not justify a change in the interest rates policy.
- Adding to this, the US monthly employment details released on Friday showed that the US labor market in the world's largest economy slowed last month and reaffirmed bets for further policy easing by the Fed. The headline Nonfarm Payrolls print came in to show that the economy added 151K jobs in February against the 160K consensus forecast.
- Moreover, the previous month's reading was revised down to 125K from 143K reported originally. Additional details of the report showed that the Unemployment Rate unexpectedly edged higher to 4.1% from 4.0% in January. This, to a larger extent, overshadowed a rise in the Average Hourly Earnings to 4% from 3.9% in January (revised from 4.1%).
- Traders are now pricing in about three rate cuts of 25 basis points each by the Fed by the end of this year. This, in turn, triggers a fresh leg down in the US Treasury bond yields, which keeps the USD bulls on the defensive. Despite the supporting factors, the non-yielding precious metal has been struggling to attract meaningful buyers, warranting caution for bulls.
Gold price could aim towards challenging the all-time peak once the $2,930 immediate hurdle is cleared decisively
From a technical perspective, the Gold price has been showing some resilience below the $2,900 mark. Moreover, oscillators on the daily chart – though they have been losing traction – are still holding in positive territory. That said, the recent repeated failures to make it through the $2,925-2,930 supply zone make it prudent to wait for strong follow-through buying before placing fresh bullish bets. The XAU/USD might then aim to challenge the all-time peak, around the $2,956 region touched on February 24.
On the flip side, acceptance below the $2,900-2,895 horizontal zone might prompt some technical selling and drag the Gold price to the $2,860-2,858 horizontal zone. The downward trajectory could extend further towards the February 28 swing low, around the $2,833-2,832 area, before the XAU/USD eventually drops to the $2,800 round-figure mark.
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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