- Gold Price pulls back from near its highest peak ever, but its shortcomings seem to be limited.
- Concerns about Trump's trade tariffs and the world trade war should lend support to bullion.
- The underlying USD bearish sentiment could contribute to limiting the loss of Xau/USD pairs.
Gold Price (XAU/USD) will drop into fresh, low areas every day, with the first half of Friday's European session, extending a stable daytime retracement slide from near the highs mentioned the day before. The US Dollar (USD) attracts some buyers and reverses some of the previous day's slump since December 10th to its lowest level. Metals in slightly overgrown conditions on the daily chart.
But worry that US President Donald Trump's tariff plans could trigger a world trade war could continue to serve as a tailwind for safe haven gold prices. Furthermore, expectations that Trump's protectionist policies will rekindle inflation could serve as a tailwind for bullion, which is considered a hedge against price increases. This makes it wise to wait for a strong follow-through sale before placing meaningful fix slides for the XAU/USD pair.
Gold Price Bulls take some profit from the table amid advent of US dollar purchases
- Uncertainty surrounding President Donald Trump's threatened tariffs and impact on the global economy led to Safe Haven gold prices rising to a new record high near the $2,955 region on Thursday.
- Since taking office on January 20, Trump has imposed a 25% tariff on steel and aluminum and an additional 10% tariff on Chinese imports, and will announce fresh tariffs within next month. there is.
- Meanwhile, the softer than planned sales forecast from Walmart raised questions about its underlying economic strength amid concerns that moving Trump's policies would drive inflation and undermine consumer spending.
- Hope for a peace agreement between Russia and Ukraine appears to have declined by strengthening Ukrainian drone attacks at Russian oil pumping stations, which could further serve as a tailwind for precious metals.
- The US dollar remains close to its lowest level since December 10th, amid more interest rate cut bets by the Federal Reserve, and is another capable of providing support for the Xau/USD pair. It may prove to be a factor.
- However, Fed officials are wary of future interest rate cuts amidst the sticky inflation.
- St. Louis Federal President Albert Musalem warned Thursday that rising inflation expectations combined with the risk of stubborn stags could create a double challenge for the US economy.
- Earlier on Thursday, Fed Commission Gov. Adriana Kugler said that US inflation still has some way to reach the central bank's 2% target, and the path to that target remains bumpy He said.
- In contrast, Atlanta Federal President Rafael Bostic has been taking a more dove tone and sees room for two more interest rate cuts this year, but says it is heavily dependent on the evolving economic situation. It's there.
- Traders look forward to Flash PMI Prints for new insights into global economic health.
- Apart from this, the US Economic Docket – featuring existing home sales data and the release of the revised Michigan Consumer Sentiment Index – could contribute to the production of short-term opportunities.
Gold prices should fall below $2,900 to support a deeper outlook for correctional decline
From a technical standpoint, the daily relative strength index (RSI) remains close to the 70 mark, and bullish traders need to be careful. That said, a recent breakout of a horizontal barrier of 2,928-2,930 representing the top boundary of short-term trading range suggests that the path of minimal resistance to gold prices is rising. Therefore, further slides are considered a purchase opportunity close to the $2,900 mark. This is followed by $2,880 in support, if it breaks, you can direct Xau/USD into the $2,834 zone in the $2,860-$2,855 area, and ultimately drag it to the 2,800 mark.
Meanwhile, bullish traders may wait for short-term consolidation and follow-through purchases, past regions, between $2,950 and $2,955, before placing new bets. Nevertheless, the constructive setup supports the prospect of an extension of the recently established uptrends seen over the past two months or so.
US Dollar FAQ
The US dollar (USD) is the official currency of the United States and is “effectively” currency in a considerable number of other countries in circulation along with local notes. According to data from 2022, it is the most frequently traded currency in the world, accounting for more than 88% of global forex sales, or an average of $6.6 trillion per day. After World War II, the US dollar took over from the British pound as the world's reserve currency. For much of its history, the US dollar was supported by gold, but in 1971 there was the Bretton Woods Agreement, which lost its gold standard.
The most important single factor affecting the value of the US dollar is monetary policy shaped by the Federal Reserve. The Fed has two tasks: achieving price stability (control inflation) and promoting full employment. The main tool to achieve these two goals is adjusting interest rates. When prices rise rapidly and inflation exceeds the Fed's 2% target, the Fed will raise interest rates and help the USD value. If inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which is heavier on the greenback.
In extreme circumstances, the Federal Reserve could also print more dollars and enact quantitative easing (QE). QE is a process that dramatically increases the credit flow in the financial system where the Fed has been stuck. This is a non-standard policy measure used when credits run out (due to the fear of counterparty defaults) as banks are not lending to each other. If you're not likely to achieve the desired outcome simply by lowering your interest rates, this is a last resort. Fed combating the credit crunch that occurred during the 2008 financial crisis was a weapon of choice for the Fed. It involves printing Fed prints in more dollars and using them to buy US government bonds primarily from financial institutions. QE usually weakens the US dollar.
Quantitative tightening (QT) is the reverse process in which the Federal Reserve stops purchasing bonds from financial institutions and does not reinvest principal from mature bonds with new purchases. Usually, it's positive for US dollars.
