- Gold prices will rise in early European sessions on Friday.
- The fear of trade wars and lower US bond yields support precious metals.
- Investors are braces for January retail sales data in the US, scheduled for the second half of Friday.
Gold prices (XAU/USD) will be extended early in Europe's trade hours on Friday. There is growing concern over US President Donald Trump's tariff plans, so precious metals can get some support. Furthermore, a decrease in US bond yield across the curve contributes to the advantages of yellow metals.
But the expectation that the US Federal Reserve will stick to the hawkish stance and hold interest rates higher could drag the non-aged yellow metal down. Traders will be looking at the release of US retail sales in January, scheduled for the second half of Friday.
Gold prices rise amid fears of the world trade war
- Trump released a roadmap on Thursday to charge mutual tariffs on all countries that impose duties on US imports.
- However, Commerce Department and economics officials will need to study mutual tariffs on countries that impose tariffs on US goods, and are not scheduled until April 1st.
- According to the U.S. Bureau of Labor Statistics on Thursday, the U.S. Producer Price Index (PPI) rose 3.5% year-on-year in January and 3.3% in December. This reading exceeded the market expectations of 3.2%.
- The annual core PPI rose 3.6% year-on-year in January, but 3.7% (adjusted from 3.5%) beat 3.3% before.
- The US initial unemployment claim for the week ending February 8th fell below the market consensus of 215K compared to the previous week of 220K (revised from 219K).
The broader trend in gold prices remains constructive, but acquired RSIs must pay attention to bulls
Technically, gold prices maintain a strong uptrend in daily time frames as prices are kept above the 100-day index moving average (EMA). However, the 14-day relative strength index (RSI) remains in an excess area above 70.0 and caution must be taken before positioning for further profits.
The first upside down barrier of yellow metal appears in the $2,942-$2,943 zone, representing the highest ever peak touched on Tuesday. The expanded profits allowed us to see the rally to the Bollinger Band cap of $2,955. A critical break beyond this level could pave the way to a $3,000 psychological level.
Conversely, the initial support level was $2,864, the lowest on February 12th. As it is further south, the lowest on January 29th was $2,744. , represents the Bollinger Band and the lower limit of EMA for 100 days.
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.
