- Gold does not see a material recovery at the start of the week despite tariffs being set to hit on Tuesday.
- Federal Reserve rate cut bets remain the second biggest driver for higher Gold prices.
- The precious metal holds near the daily Pivot Point and could recover further.
Gold’s price (XAU/USD) holds steady and looks for direction on Monday after an initial surge higher during the Asian session. Although tariffs are set to hit on Tuesday for Mexico and Canada and additional tariffs on China, they are not really triggering another flight into Gold. Traders will need to look for new headlines about tariffs, and there is still the chance that United States (US) President Donald Trump will change his mind.
Meanwhile, traders are still digesting Friday’s turn of events. The spat between Ukraine President Volodymyr Zelenskyy on one side and US President Trump and Vice-President J.D. Vance is still making headlines. The surprise move that took place afterward in London, with the United Kingdom extending several billions in loans to be covered with the frozen Russian assets in Europe, was actually something that President Trump was after. With no rare earth deal in place, the televised spat in the Oval Office, and now London reeling in the agreement on the frozen Russian assets, all bets could be off the table with even possibly the US withdrawing from NATO.
Daily digest market movers: Gold looking for support in headlines
- Ghana’s new central bank chief, Johnson Asiama, has suspended the West African nation’s program of paying for Oil with Gold and said he expects the Ghana cedi (GHC) to stabilize after its volatility of last year, Bloomberg reports..
- The CME Fedwatch tool shows a 77.6% chance of a lower monetary policy rate for the Federal Reserve (Fed) in June, while the odds of keeping it unchanged are 22.4%.
- At 18:00 GMT, Federal Reserve Bank of Richmond President Thomas Barkin delivers a speech, “Inflation Then and Now”, in Fayetteville Cumberland Economic Development.
- The US 10-year benchmark rate is currently trading around 4.23% on Monday, a touch higher from its fresh low at 4.19% on Friday.
Technical Analysis: A very long road ahead
It looks like the cat is out of the bag for now. Last week, traders received all the information they needed, and the first new tariffs under the second term from US President Trump are set to kick in on Tuesday. For Bullion to be enabled to make a fresh all-time high, or at least move in that direction, new tariffs will be needed. Besides that, a continuous descent in yields would also help, where both drivers would be enough to see a steep rally in Gold prices again.
The daily Pivot Point at $2,857 is currently providing support to bounce off from and attempt to push Bullion higher. Further up, the daily R1 resistance at $2,882 is the first big level to watch out for and converges with February 14 and 17 lows. In case Gold has enough oomph to break through there, the daily R2 resistance at $2,910 will possibly be the final cap on Monday.
On the downside, the S1 support at $2,835 converges with Friday’s low. That will be vital support for Monday. If Bullion bulls want to avoid another leg lower, that level must hold. Further down, the dailyS2 support at $2,805 should be able to catch any additional downside pressure and will try to avoid a break below $2,800 and $2,790.
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.