Forex Today: Gold climbs to new record-high, markets await US inflation data

Source Fxstreet

Here is what you need to know on Friday, March 28:

Markets cling to a cautious stance to start the last trading day of the week. The European economic docket will feature consumer and business sentiment data on Friday. Later in the day, February Personal Consumption Expenditures (PCE) Price Index data from the US, the Federal Reserve's preferred gauge of inflation, will be scrutinized by market participants.

US Dollar PRICE This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.

USD EUR GBP JPY CAD AUD NZD CHF
USD 0.20% -0.36% 0.75% -0.22% -0.35% 0.21% -0.18%
EUR -0.20% -0.67% 0.03% -0.38% -0.56% 0.05% -0.34%
GBP 0.36% 0.67% 1.13% -0.34% 0.08% 0.73% 0.23%
JPY -0.75% -0.03% -1.13% -0.98% -1.12% -0.53% -0.95%
CAD 0.22% 0.38% 0.34% 0.98% -0.07% 0.43% 0.04%
AUD 0.35% 0.56% -0.08% 1.12% 0.07% 0.63% 0.24%
NZD -0.21% -0.05% -0.73% 0.53% -0.43% -0.63% -0.33%
CHF 0.18% 0.34% -0.23% 0.95% -0.04% -0.24% 0.33%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

The US Dollar (USD) weakened against its major rivals on Thursday as US President Donald Trump's tariff announcements revived concerns over an economic downturn in the US. During the American trading hours, the currency benefited from the risk-averse market atmosphere and limited its losses. Early Friday, the USD Index fluctuates in a narrow range below 104.50. The annual PCE inflation is forecast to hold steady at 2.5% in February.

The Bank of Japan's Summary of Opinions showed early Friday that one policymaker noted that inflation was "somewhat overshooting" expectation. In the meantime, the Tokyo Consumer Price Index rose by 2.9% on a yearly basis in March, following the 2.8% increase recorded in February. After posting gains for two consecutive days, USD/JPY edges lower and trades near 105.50 in the European morning on Friday.

The UK's Office for National Statistics reported on Friday that Retail Sales rose by 1% on a monthly basis in February. This reading followed the 1.4% increase recorded in January and came in better than the market expectation for a decrease of 0.3%. GBP/USD holds its ground following the upbeat UK data and trades marginally higher on the day above 1.2950.

EUR/USD gained nearly 0.5% on Thursday and snapped a six-day losing streak. The pair stays in a consolidation phase at around 1.0800 in the European morning on Friday.

Gold gathered bullish momentum after moving sideways in the first half of the week and climbed to a new record-high. XAU/USD extends its rally early Friday and trades at a fresh all-time peak above $3,080.

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.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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