Gold price edges lower amid easing haven demand, headwinds from Fed and Trump
- Gold price edges lower after Monday’s market turmoil on the Moody’s downgrade for the US credit rating.
- President Trump hinted that the US might withdraw completely in further attempts to solve the Ukraine-Russia impasse.
- Gold trades in a tight range, holding above $3,200 in Tuesday’s trading.
Gold (XAU/USD) price edges slightly lower on Tuesday, looking for direction after giving back the previous day’s gains, falling back to around $3,226 at the time of writing. The pop in Gold got tempered by several Federal Reserve (Fed) officials on Monday, commenting on the US credit rating downgrade by rating agency Moody’s. Federal Reserve Bank of Atlanta President Raphael Bostic said the downgrade could have a ripple effect through the economy, and that another 3 to 6 months of waiting time is needed to see how uncertainty settles, Bloomberg reports.
In the geopolitics front, the image of the US got dented a bit further after United States (US) President Donald Trump commented on his two-hour phone call with Vladimir Putin on ending the impasse in Ukraine. President Trump said that negotiations would start immediately, though if they break down again, the US would back away from any further efforts and negotiations. Trump said there were "some big egos involved," and without progress, "I'm just going to back away," repeating a warning that he could abandon the process and concluded with "This is not my war," Reuters reports.
That statement suggests that the US President make a complete U-turn, as it was one of his campaign promises, to end the war in his first 100 days. Now that President Trump seems unable to resolve the situation, it looks like Trump will rather pull out and walk away from it.
Daily digest market movers: Geopolitical, trade talks, USD to drive Gold’s price
- Gold fell as the haven-demand boost from Moody’s Ratings downgrade of the US faded, and attention turned back to the easing of trade tensions between the two largest economies, Reuters reports.
- The Trump administration has granted the final federal permit for a Gold mine being developed by Perpetua Resources Corp., which also has a reserve of antimony, a critical mineral used in munitions. The US Army Corps of Engineers issued the Clean Water Act permit needed for the Stibnite project in Idaho, which was facilitated by Interior Secretary Doug Burgum, the chair of the National Energy Dominance Council, according to a statement from his department, Bloomberg reports.
- US Treasuries are treading steady on Tuesday after whipsawing on Monday with the downgrading of US debt by Moody’s Ratings. US equity-index futures are down 0.3% while Gold dips 0.5% due to weak demand for havens, Bloomberg reports.
Gold Price Technical Analysis: Backing away
The dented image of the US Dollar (USD) and the US as a whole should be something from which Gold as a safe haven should benefit. Though the headwinds coming from high yields make it difficult for the precious metal to bank on that. Instead, expect to see a sideways pattern for now, until the next catalyst presents itself.
On the upside, the pivotal technical level at $3,245 (April 1 high) is acting as resistance, already proved on Monday to be difficult to reclaim. Once through there, the R1 resistance at $3,250 and the R2 resistance at $3,271 are the following levels to watch, though a major catalyst would be needed to get it there.
On the other side, the daily S1 support stands at $3,207, ahead of the $3,200 big figure. In case that level does not hold, expect a move lower to the intraday S2 support at $3,185 and the April 3 high at $3,167, before the 55-day Simple Moving Average (SMA) at $3,151.
XAU/USD: Daily Chart
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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