- The price of gold rises to around $ 3,350 in the first Asian session on Monday, with an increase of 0.80% in the day.
- The significant uncertainty about Trump tariffs on imports in the US supports the price of gold.
- Fed hard line statements could limit the bullish potential of the XAU/USD.
The price of gold (Xau/USD) rises about $ 3,350 during the first Asian session on Monday after facing some benefits due to the long weekend. The uncertainty about the tariff policies of US President Donald Trump and the persistent geopolitical tensions continue to support the precious metal.
Investors have rushed to take refuge in safe assets such as gold due to the growing uncertainty about tariffs and their impact on the economy, which has resulted in an increase of more than 25% in yellow metal prices since January. “The argument to add gold assignments has become more convincing than ever in this environment of growing tariff uncertainty, lower growth, greater inflation, geopolitical risks and diversification of US assets and the US dollar,” UBS analysts said.
In addition, central bankers have been adding gold to their portfolios. China, the world’s largest gold consumer, added gold to its holdings for the fifth consecutive month, increasing its precious metal demand as an active refuge against growing global trade and geopolitical tensions.
On the other hand, the president of the Federal Reserve (FED), Jerome Powell, adopted a hard line position last week, reducing the probability of a reduction of Fed rates in June. Meanwhile, the president of the Fed of San Francisco, Mary Daly, said Friday that the US economy is in a good situation, although some sectors are slowing down. This, in turn, could raise to the dollar and weigh on the price of the raw material called in USD.
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.
