- Gold is up 1.70% to a fresh record of $2,985 due to uncertainty about US trade policy.
- Mixed signals from Trump administration officials about the trade-induced recession fear fuel investors will plunge into gold and Japanese yen.
- The market will focus on the Fed's policy decisions next week, with constant but important hints expected from new economic forecasts.
Gold prices surged Thursday, with the yellow metal reaching a new record high of $2,989, but were ready to expand the trend towards a $3,000 figure. Uncertainty about US trade policy and an increase in the likelihood that the Federal Reserve will lower interest rates that support precious metals. Xau/USD is up 1.86% at $2,988.
Yellow metal advances are expected to continue as US President Donald Trump attempts to reduce the trade deficit as he embarks on a trade war with US allies and enemies. The fluctuations in the obligations and removal of imports continue to accumulate money on the safe haven appeal of gold.
Recently, some US officials don't seem to be worried about Wall Street's reaction to Trump's administration's trade policy. US Treasury Secretary Scott Bescent said last Friday that his comments about the “detox period” did not mean that a recession was necessary. In contrast, U.S. Secretary of Commerce Howard Lutnick said the recession was “valuable” for implementing current administration policies.
This was a green light for investors. Investors continued to sell US stocks and purchased safe inventory assets such as gold and Japanese yen (JPY).
Meanwhile, data remains in the back seat and is covered in tariffs. Previously, the US Bureau of Labor Statistics (BLS) revealed that inflation on the part of producers has not changed primarily and is declining slightly. At the same time, the number of Americans applying for unemployment benefits has been soaked last week, BLS revealed.
This week, traders will see consumer sentiment at University of Michigan (UOM) in March. However, their radar will focus on the Federal Reserve monetary policy decisions next week. The Fed is expected to keep prices unchanged, update its economic forecasts and use the infamous “dot plot” to determine policy paths.
Daily Digest Market Mover: Gold Prices are stunned to strong US dollars
- The yield on US 10-year financial obligations eliminated yesterday's profits, lowering 4.5 basis points to 4.270%.
- The US real yield is measured by the yield on the US 10-year Treasury Department Inflation Protection Securities (TIPS), which correlates with gold prices to 1.99%.
- The US Dollar Index (DXY), which tracks greenback values for six currencies, recovers from 0.27% to 103.85.
- The US Producer Price Index (PPI) in February was softer than expected, up 3.2% year-on-year, down below 3.3% from 3.7% in January.
- Core PPIs, which exclude volatile components, did not reach an estimate of 3.5% year-on-year, relaxing from 3.6% in the previous month, an increase of 3.4% year-on-year.
- Despite cooler than expected inflation data, economists warn that tariffs on US imports could lead to new increases inflation in the coming months.
- Meanwhile, it has been previously reported that the initial unemployment claims for the week ending March 8th have fallen to 220K, breaking the forecast of 225K and improving from 222K.
- On Wednesday, 25% US tariffs on steel and aluminum came into effect as US President Donald Trump fights to reduce the trade deficit by applying import obligations.
- Money market futures traders were priced at 74 basis points by the Federal Reserve towards the end of the year.
- The Atlanta Fed GDPNOW model forecasts the first quarter of 2025 at -2.4%. This is the first negative print since the Covid-19 pandemic.
Xau/USD technology outlook: Gold price is $3,000
Bullion prices are trading at a record high of $2,989 after clearing the previous year's (YTD) high of $2,954 on February 20th. Momentum remains very bullish, with the relative strength index (RSI) gradient having a higher aim, but there is a room before it becomes overloaded. That said, Gold's next resistance will be $3,000. The latter offence exposes $3,050, followed by the $3,100 mark.
Conversely, if Xau/USD falls below $2,950, the next support is $2,900, $2,850. The following support is at a low of $2,832 on February 28th.
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 weaken gold prices, selling in high-risk markets tends 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.
