Gold price sits near record high, continues to draw support from the global flight to safety
- Gold price remains close to all-time peak as rising trade tensions underpin safe-haven demand.
- Bets that the Fed will cut rates several times in 2025 lend additional support to the XAU/USD.
- The USD hangs near a multi-month low and further underpins the commodity ahead of the Fed.
Gold price (XAU/USD) struggles to attract any meaningful buyers on Monday, though it remains close to the all-time top – levels beyond the $3,000 psychological mark touched on Friday. Against the backdrop of concerns about escalating trade tensions and a global trade war, geopolitical tensions continue to act as a tailwind for the safe-haven bullion. Apart from this, bets for more interest rate cuts by the Federal Reserve (Fed) further underpin demand for the non-yielding yellow metal.
Meanwhile, the prospects for further policy easing by the US central bank keep the US Dollar (USD) depressed near a multi-month low touched last week, which, in turn, lends additional support to the Gold price. That said, a generally positive tone around the Asian equity markets, bolstered by the optimism over China's stimulus measures announced over the weekend, cap gains for the XAU/USD. Traders also seem reluctant ahead of a two-day FOMC policy meeting starting on Tuesday.
Daily Digest Market Movers: Gold price bulls retain control amid trade jitters, geopolitical risks and dovish Fed expectations
- US Treasury Secretary Scott Bessent said late Sunday that he is not worried about recent market downturns because corrections are healthy and normal. Commenting on the chance of a recession, Bessent added that there are no guarantees. This, along with worries about the potential economic fallout from US President Donald Trump's trade tariffs, continues to act as a tailwind for the safe-haven Gold price.
- On the geopolitical front, Houthi leader Abdul Malik al-Houthi, following deadly US airstrikes, said on Sunday that his militants would target US ships in the Red Sea as long as the US continues its attacks on Yemen. In response, the US defense secretary said on Sunday that the US will continue attacking Yemen's Houthis until they stop attacks on shipping, raising the risk of a further escalation of conflict in the region.
- Meanwhile, an Israeli drone attack in northern Gaza killed at least nine people, including three journalists on Saturday. Israel’s military said that its forces have intervened to thwart threats by terrorists approaching its troops or planting bombs since the January 19 ceasefire took effect. The Israeli military added that six men killed in the strike were identified as members of the armed wings of Hamas.
- Market participants have been pricing in the possibility that the Federal Reserve will lower interest rates several times this year amid worries about an economic downturn on the back of the Trump administration's aggressive trade policies. This comes on top of softer US inflation figures released last week and signs of a cooling labor market, supporting prospects for further policy easing by the US central bank.
- In fact, the Fed funds futures suggest that the Fed could lower borrowing costs by 25 basis points each at the June, July, and October monetary policy meetings. The expectations were further reaffirmed by the University of Michigan Surveys on Friday, which showed that the Consumer Sentiment Index plunged to a nearly 2-1/2-year low in March. This keeps the US Dollar bulls on the defensive near a multi-month low.
- China’s State Council announced a special action plan on Sunday aimed at stimulating domestic consumption and introduced measures to increase household incomes. Adding to this, China’s Shenzhen eased its housing provident fund loan policies to stimulate the property market and clear the overhang. This, in turn, boosts investors' confidence and caps any meaningful gains for the safe-haven XAU/USD pair.
- Traders now look forward to Monday's US economic docket – featuring the release of monthly Retail Sales and the Empire State Manufacturing Index – for some impetus later during the North American session. The focus, however, will remain glued to the crucial FOMC decision on Wednesday, which will influence the USD price dynamics and provide a fresh directional impetus to the non-yielding yellow metal.
Gold price needs to consolidate before the next leg up; downside potential seems limited amid a bullish technical setup
From a technical perspective, last week's breakout through the $2,928-2,930 horizontal resistance and a subsequent move was seen as a fresh trigger for bulls. That said, the daily Relative Strength Index (RSI) remains close to the overbought territory and is holding back traders from placing fresh bullish bets around the Gold price. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before the next leg up. Nevertheless, the broader setup suggests that the path of least resistance for the XAU/USD pair remains to the upside and supports prospects for an extension of a well-established uptrend witnessed over the past three months or so.
Meanwhile, any meaningful corrective slide might now attract fresh buyers near the $2,956 resistance breakpoint, below which the Gold price could drop to the $2,930-2,928 horizontal zone. The latter should act as a key pivotal point. A convincing break below might prompt some technical selling and pave the way for deeper losses. The XAU/USD pair might then accelerate the fall towards the $2,900 round figure en route to last week's swing low, around the $2,880 region.
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.
Artigos Recomendados
