Gold price climbs amid US-China trade war, post US NFP data
- Gold gains as traders react to President Trump's threat of new reciprocal tariffs, enhancing its safe-haven status.
- US Nonfarm Payrolls fall short of expectations, yet a declining Unemployment Rate suggests a resilient labor market.
- PBoC’s increased Gold reserves and cautious comments from Fed officials contribute to the metal's price dynamics.
Gold resumed its uptrend on Friday amid the escalation of the trade war between the US and China and a mixed US employment report. The XAU/USD trades at $2,862, up 0.24%.
US President Donald Trump's plans to announce reciprocal tariffs on many countries next week lent a lifeline to Bullion traders as the yellow metal rose on those remarks. Therefore, tensions over the weekend could increase flows to Gold’s safe-haven appeal.
US data revealed that Nonfarm Payrolls in January missed the mark, but the Unemployment Rate dipped compared to estimates and December’s reading. The data suggests the labor market remains strong, which might prevent the Federal Reserve (Fed) from easing policy.
Following the data, Bullion prices jumped to the session's highs of $2,886, but once the dust settled, Gold retraced to its previous level.
Earlier, reports emerged that the People’s Bank of China (PBoC) resumed buying Gold with reserves increasing from 73.29 million ounces to 73.65 million ounces.
Meanwhile, Fed speakers crossed the newswires, continuing with their patient rhetoric.
Minneapolis Fed President Kashkari sees the policy rate “modestly lower.” Chicago Fed President Goolsbee said recently that NFP data was solid and that rates would be lower, but the pace “will be slower with more fogginess.”
Fed Governor Adriana Kugler said the inflation rate “has gone sideways,” adding that “it makes sense to hold the policy rate where it is.”
Daily digest market movers: Gold price climbs alongside the US Dollar
- The US Dollar Index (DXY) edges up 0.32% and sits at 108.04 after hitting a daily low of 107.51.
- The US 10-year Treasury bond yield rises five basis points to 4.487%.
- US real yields, which correlate inversely to Bullion prices, climbed three basis points to 2.062%, a headwind for XAU/USD.
- US Nonfarm Payrolls in January dipped from 256K to 143K, missing the mark of 170K. The Unemployment Rate slid from 4.1% to 4%.
- Money market fed funds rate futures are pricing in 39 basis points of easing by the Federal Reserve in 2025.
XAU/USD technical outlook: Gold prices set to challenge $2,900
Gold’s trend is up yet bulls have failed to clear the $2,900 figure. The Relative Strength Index (RSI) is in overbought territory, while XAU/USD’s price action shows signs of exhaustion.
If Gold drops below $2,800, the next support would be the psychological $2,750 area, followed by the January 27 swing low of $2,730. Conversely, if the yellow metal rises above $2,900, the next key resistance would be the psychological $2,950, followed by $3,000.
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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