- The price of gold gains impulse up to a historical maximum around $ 3,190 in the first measures of the Asian session on Friday.
- An escalation of the commercial war between the US and China supports the price of gold.
- Bets reduced by FED fees cuts could help limit the losses of the XAU/USD.
The price of gold (Xau/USD) shoots about a historical maximum around $ 3,190 during Friday’s first Asian session. The weakness of the US dollar (USD) and the escalation of the commercial war between the United States (USA) and China provide some precious metal support, a traditional safe refuge asset.
The data published by the US Labor Statistics Office (BLS) on Thursday revealed that consumer prices in the US fell unexpectedly in March, but the risks of inflation are inclined up to rise after the US president Donald Trump, reaffirmed the tariffs to China. The US IPC inflation was reduced to 2.4% year -on -year in March from 2.8% in February. This reading was below the market expectation of 2.6%.
The underlying IPC, which excludes volatile food and energy prices, increased a 2.8% year -on -year in March, compared to an increase of 3.1% observed in February and was below the 3.0% consensus. In monthly terms, the general CPI decreased by 0.1%, while the underlying IPC rose 0.1%.
Trump said Wednesday that he would temporarily reduce tariffs to dozens of countries. However, Trump also increased tariffs to China to 125%, with immediate effect, after Beijing announced plans to retaliate with tariffs of 84%. Concerns about the global economy and renewed commercial tensions between the two largest economies in the world keep investors in safe refuge assets, supporting the price of gold.
On the other hand, bets reduced by federal reserve rates cuts (Fed) that can strengthen the dollar and weigh on the price of raw materials called in USD. Operators now expect the Fed to resume the interest rate cuts in June and probably reduce their policy rate at a complete percentage point by the end of the year.
FAQS GOLD
Gold has played a fundamental role in the history of mankind, since it has been widely used as a deposit of value and a half of exchange. At present, apart from its brightness and use for jewelry, precious metal is considered an active refuge, which means that it is considered a good investment in turbulent times. Gold is also considered a coverage against inflation and depreciation of currencies, since it does not depend on any specific issuer or government.
Central banks are the greatest gold holders. In their objective of supporting their currencies in turbulent times, central banks tend to diversify their reserves and buy gold to improve the perception of strength of the economy and currency. High gold reserves can be a source of trust for the solvency of a country. Central banks added 1,136 tons of gold worth 70,000 million to their reservations in 2022, according to data from the World Gold Council. It is the largest annual purchase since there are records. The central banks of emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has a reverse correlation with the US dollar and US Treasury bonds, which are the main reserve and shelter assets. When the dollar depreciates, the price of gold tends to rise, which allows investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rebound in the stock market tends to weaken the price of gold, while mass sales in higher risk markets tend to favor precious metal.
The price of gold can move due to a wide range of factors. Geopolitical instability or fear of a deep recession can cause the price of gold to rise rapidly due to its condition of active refuge. As an asset without yield, the price of gold tends to rise when interest rates lower, while the money increases to the yellow metal. Even so, most movements depend on how the US dollar (USD) behaves, since the asset is quoted in dollars (Xau/USD). A strong dollar tends to keep the price of gold controlled, while a weakest dollar probably thrusts gold prices.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
