Gold price continues scaling new record highs amid trade jitters, bearish USD
- Gold price continues to attract safe-haven flows on Monday amid trade-related uncertainties.
- The USD dived to a two-year low amid recession fears that further benefits the XAU/USD pair.
- Overbought conditions on the daily chart warrant caution before placing fresh bullish bets.
Gold price (XAU/USD) regains strong positive traction following Friday's modest downtick and climbs to a fresh all-time peak, closer to the $3,400 mark at the start of a new week. Trade war concerns continue to fuel recession fears and weigh on investors' sentiment, which is evident from a weaker tone around the equity markets and driving flows towards the traditional safe-haven precious metal. Apart from this, the prevalent US Dollar (USD) selling bias is seen as another factor benefiting the commodity.
US President Donald Trump’s back-and-forth tariff announcements have dented investors' confidence in the US economy. This, to a larger extent, overshadowed Federal Reserve (Fed) Chair Jerome Powell's relatively hawkish comments last week and dragged the USD to a fresh two-year low, which provides an additional boost to the Gold price. Bulls, meanwhile, seem rather unaffected by overstretched conditions on the daily chart, suggesting that the path of least resistance for the XAU/USD is to the upside.
Daily Digest Market Movers: Gold price remains well supported by the global rush to safety amid rising trade tensions
- Investors remain worried about the potential economic fallout from US President Donald Trump's trade tariffs and the rapidly escalating US-China trade war, pushing the safe-haven Gold price to a fresh all-time peak on Monday. In fact, Trump recently imposed tariffs of up to 145% on certain Chinese goods, with some duties reportedly reaching 245%. In retaliation, China has levied tariffs of 125% on US products.
- Meanwhile, Trump's aggressive trade policies could hurt the world trade order and trigger a recession in the US. This, in turn, drags the US Dollar to its lowest level since April 2022 and further benefits the precious metal. The USD bulls shrugged off Federal Reserve Chair Jerome Powell's hawkish comments, saying that the central bank is well-positioned to wait for more clarity before making any changes to the policy stance.
- Furthermore, market participants are still pricing in the possibility that the Fed will resume its rate-cutting cycle in June and lower borrowing costs by a full percentage point by the end of this year. This turns out to be another factor that contributes to driving flows towards the non-yielding yellow metal, amid thin trading conditions on the back of the Easter Monday holiday and despite overbought conditions on the daily chart.
- Iran and the US agreed on Saturday to commence expert-level discussions to design a framework for a potential nuclear deal. Moreover, Russian President Vladimir Putin's one-day ceasefire in Ukraine on Saturday sparked hopes that tensions could de-escalate. This, however, does little to boost investors' confidence or dent demand for traditional safe-haven assets, supporting prospects for a further appreciation for the XAU/USD pair.
- There isn't any relevant market-moving economic data due for release from the US on Monday, though a scheduled speech from Chicago Fed President Austan Goolsbee might influence the USD. Apart from this, trade-related developments should provide some impetus to the commodity. The market focus will then shift to the release of flash PMIs on Wednesday, which should offer a fresh insight into the global economic health.
Gold price needs to consolidate before the next leg up amid overbought daily RSI; bullish potential seems intact
From a technical perspective, the relentless buying validates the near-term positive outlook for the Gold price. However, the daily Relative Strength Index (RSI) is holding well above the 70 mark and might force bullish traders to pause for a breather. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before positioning for an extension of a multi-month-old uptrend.
In the meantime, any corrective slide might now find some support near the $3,350 zone. This is followed by the Asian session low, around the $3,329-3,328 region, below which the Gold price could accelerate the fall towards the $3,300 round figure en route to Friday's swing low, around the $3,284 area. The latter should act as a key pivotal point, which if broken decisively could pave the way for deeper losses.
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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