Gold Price Forecast: XAU/USD edges higher to near $3,250 as trade questions linger
- Gold price drifts higher to around $3,245 in Monday’s early Asian session.
- US tariff uncertainty boosts the safe-haven flows, supporting the Gold price.
- US NFP rose by 177K in April vs. 130K expected.
The Gold price (XAU/USD) trades in positive territory near $3,245 during the early Asian session on Monday. The renewed concerns over the US recession and US-China trade relations provide some support to safe-haven assets like Gold. The US ISM Services Purchasing Managers Index (PMI) for April will be in the spotlight later on Monday.
While the Chinese Commerce Ministry indicated Beijing was considering an offer from the US to hold talks over US President Donald Trump's 145% tariffs, the two sides still seem far apart. Trump avoided answering the question if there will be trade deals this week, saying there 'could' be. The uncertainty surrounding tariff boosts the safe-haven flows, benefiting the precious metal.
The rising bets that the Fed will cut its interest rate in June raise non-yielding bullion's appeal. "The labor report leaves little doubt that the FOMC will keep rates on hold this week, and the bar for cutting is now even higher for June," said Michael Feroli, head of U.S. economics at JPMorgan.
Nonfarm Payrolls (NFP) in the United States (US) rose by 177K in April, according to the US Bureau of Labor Statistics (BLS) on Friday. This figure followed the 185K increase (revised from 228K) seen in March and came in above the market consensus of 130K. Additionally, the Unemployment Rate remained unchanged at 4.2% in April, as expected, while the Average Hourly Earnings held steady at 3.8% YoY in the same reported period.
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.
On the other hand, improved market sentiment and a risk-on trade could drag the yellow metal lower and lead to some profit-taking in Gold's safe-haven. Trump eased tensions with the US Fed, saying that he will not remove Jerome Powell as Fed Board Chairman before his term ends in May 2026. Nonetheless, Trump reiterated his belief that the Fed should cut interest rates at some point
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