- Gold prices extend the movement of horizontal integrated pricing during Monday's Asian session.
- Concerns about Trump's trade policy and Fed rate reduction continue to support the product.
- USD suffers near months of lows and also serves as a tailwind for the Xau/USD pair.
Gold Price (XAU/USD) continues its struggle to gain meaningful traction during Monday's Asian session and remains trapped in a familiar range held over the past week or so. But the downside is that cushions remain amid fears of global trade conflicts, continuing to provide support for Safe Haven Bullion. Additionally, the growing acceptance of the Federal Reserve cutting interest rates multiple times this year, strengthened by weaker US employment data on Friday, has proven to be another factor that serves as a tailwind for non-two yellow metals.
Separately, fears that Trump's trade policies will be hit by US economic activity suggest that since November, the US dollar (USD) has been curbed by its lowest level, and the path of minimal resistance in gold prices has been upside down. That said, the lack of purchasing rights requires some attention before placing fresh bullish bets around the Xau/USD pair and setting up a position for a reopening of a strong uptrend from the December 2024 low. Nevertheless, the basic background suggests that corrective slides are considered purchase opportunities and remain limited.
Daily Digest Market Mover: Gold Price Bulls remains on the bystander despite a combination of supporting factors
- The uncertainty surrounding President Donald Trump's trade policy has kept investors in place and continues to act as a tailwind for gold prices at the beginning of the new week. Additionally, investors are worried that Trump's protectionist tariffs will slow US economic growth and will allow the Federal Reserve to resume its fee-cutting cycle in June.
- In fact, Trump took another pivot on his tariff agenda, saying that imminent tariffs in Canada may or may not be coming Monday or Tuesday. This is the day after the Trump administration temporarily waives 25% steep tariffs on goods from Canada and Mexico, and has been complying with the US-Mexico-Canada agreement for a month.
- Federal Reserve Chairman Jerome Powell said Friday there is high uncertainty about the Trump administration's policies and its economic impact. Separately, San Francisco Fed President Mary Daly said late Sunday that increasing uncertainty between businesses could attenuate demand for the US economy, but did not justify changes in interest rate policies.
- Added to this, details of monthly US employment announced on Friday showed that the US labor market, the world's largest economy, was late last month, reaffirming its bet on further policy easing by the Fed. The headline's non-farm payroll print shows that in February the economy added 151K of employment to a 160K consensus forecast.
- Furthermore, the previous month's reading was revised from the original reported 143K to 125K. Additional details in the report showed that the unemployment rate unexpectedly rose from 4.0% to 4.1% from 4.0% in January. This has led to a large increase in average hourly revenue growth in January from 3.9% to 4% (revised from 4.1%).
- Traders are currently priced by the Fed by the end of this year with around three rate reductions of 25 basis points each. This causes fresh feet with US Treasury bond yields and keeps the US dollar bull on defense. Despite supportive factors, non-2-year-old precious metals struggle to attract meaningful buyers and ensure that they pay attention to bulls.
Gold prices aim to challenge the highest peak ever after the $2,930 instant hurdle is crucially cleared
From a technical standpoint, gold prices show resilience of less than $2,900. Additionally, daily chart oscillators have lost traction but still retain positive territory. That said, with the recent repeated obstacles of passing through the 2,925-2,930 supply zone, it's wise to wait for a strong follow-through purchase before making a fresh bullish bet. Xau/USD may be aiming to challenge its highest peak ever in the $2,956 region mentioned on February 24th.
On the back, below the horizontal zone of $2,900-$2,895 could encourage technical sales and drag gold prices into the horizontal zone of $2,860-$2,858. The downward trajectory can be further expanded towards the February 28 swinglow, 2,833-2,832 area before the Xau/USD finally drops to the 2,800 round figure mark.
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 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.
