- As Trump's trade policy promotes investor uncertainty, gold will climb.
- The US 10-year Treasury yields have fallen slightly, providing a tailwind for bullion.
- Buying conditions suggest that bulls could face near record levels of fatigue.
Gold prices rose to a new record high of $2,956 in early trading on Monday as greenbacks remained firmly in place and US yields remained virtually changing.
Xau/USD extends rally despite solid USD and stable yield
Uncertainty continues to support bullion prices as investors consider the trade policy proposed by US President Donald Trump. It is the last week of February, and tensions should rise in the US, Canada and Mexico after Trump delayed tariffs. Countries have agreed to work with the United States in stopping fentanyl transport and illegal immigration.
The US 10-year Treasury yield has tipped one base point to 4.443%. This is a tailwind for precious metals. The US real yield, measured by the yield on the 10-year Treasury Department's Inflation Protection Securities (TIPS), is only close to 2.017%.
Last Friday, a mix of US (US) business activity data reduced PMI while S&P Global Manufacturing PMI. The University of Michigan (UOM) has also revealed that inflation expectations have risen and consumer sentiment has worsened.
Given the background, the Xau/USD is set to extend profits, as depicted by the oscillator that was forced to buy, despite the bull appearing exhausted.
Xau/USD price forecast: Technical outlook
The gold uptrend remains intact, but buyers could steadily push prices without offensive movements. The Relative Strength Index (RSI) can be over-acquired, restraining Xau/USD's advance and paving the way for a setback.
However, if Xau/USD rises above an all-time high of $2,956, the next resistance will be $3,000. Meanwhile, if bullion prices fall below the low of $2,916 on February 21, Xau/USD could challenge $2,900 in the short term.
Gold FAQ
Gold has played an important role in human history as it is widely used as a medium of value and exchange. Apart from the gem's brilliance and usage, precious metals are now widely viewed as safe haven assets. In other words, it is considered a good investment in times of turbulence. Gold is also widely viewed as a hedge against inflation and depreciation currencies, as it is not dependent on a particular issuer or government.
The central bank is the largest holder of money. With the aim of supporting currency in turbulent times, central banks tend to buy gold to diversify reserves and improve the perceived strength of the economy and currency. High gold reserves provide a source of trust in the country's solvency. The central bank added 1,136 tonnes of gold to its bookings in 2022, worth around $70 billion, according to data from the World Gold Council. This is the best purchase every year since the record began. Central banks in emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold is inversely correlated with the US dollar and the US Treasury, both major reserve assets and safe haven assets. As the dollar depreciates, gold tends to rise, allowing investors and central banks to diversify their assets during turbulence. Gold is also inversely correlated with risk assets. While rallies in the stock market tend to lower gold prices, sales in high-risk markets tend to favor valuable metals.
A wide range of factors allow prices to move. The fear of geopolitical instability or deep recession can quickly escalate gold prices due to their safe conditions. As an asset that does not yield, gold tends to rise at lower interest rates, but the cost of higher money usually weighs the yellow metal. Still, most movements depend on how the US dollar (USD) behaves, as the asset's price is in dollars (Xau/USD). Strong dollars tend to keep the price of gold down, while weaker dollars can push the price of gold up.
