Gold rises to near $5,200 amid US tariff uncertainty, US PPI data in focus
- Gold jumps to near $5,195 in Friday’s early Asian session.
- Uncertainty around US import tariffs supports the Gold price, a safe-haven asset.
- The US and Iran will hold talks next week after progress in Geneva.
- US January PPI inflation reports will be in the spotlight on Friday.
Gold (XAU/USD) attracts some buyers to around $5,195 during the early Asian session on Friday. The precious metal edges higher as US tariff uncertainty spurs safe-haven demand. Traders await the release of the US January Producer Price Index (PPI) reports later on Friday for fresh impetus.
US President Donald Trump said that he would impose a blanket 15% tariff on imports after a Supreme Court ruling struck down his earlier reciprocal tariff regime. However, US Trade Representative Jamieson Greer stated that levies could be raised to 15% or higher for many countries in the coming days. A lack of clarity over US trade policy has provided some support to the yellow metal in the previous sessions, as Gold is widely seen as a traditional safe-haven asset during times of uncertainty.
On the other hand, easing tensions between the United States (US) and Iran might cap the upside for Gold. Oman’s Foreign Minister Badr Albusaidi said on Thursday that the US and Iran will continue nuclear talks next week after making “significant progress” in Switzerland. Traders will closely monitor the developments surrounding US-Iran talks. Negotiations will resume at a technical level in Vienna after an initial consultation period.
All eyes will be on the US PPI report on Friday as it might offer some hints about the US interest rate path. Economists expect the PPI to show a moderate increase of 0.3% MoM in January, compared to 0.5% recorded in December. The annual PPI is projected to show a rise of 2.6% in January versus 3.0% prior. A "hotter-than-expected" reading could boost the prospect of a near-term hold on US interest rates, which weighs on the precious metal that doesn’t pay interest.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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