- Gold price regains positive traction amid a modest USD pullback from a multi-week high.
- Persistent trade-related uncertainties also lend support to the safe-haven precious metal.
- Reduced Fed rate cut bets might cap the commodity ahead of the critical US CPI report.
Gold price (XAU/USD) attracts some dip-buying during the Asian session on Tuesday and reverses a major part of the previous day's retracement slide from a nearly three-week high. The US Dollar (USD) pauses for a breather following the recent run-up to its highest level since June 24, ahead of the release of US consumer inflation figures later in the day and, acts as a tailwind for the commodity. The crucial data would influence market expectations about the Federal Reserve's (Fed) rate-cut path, which, in turn, will play a key role in driving the USD and providing some meaningful impetus to the non-yielding yellow metal.
In the meantime, bets that the US central bank will keep rates elevated in anticipation of worsening inflation as a result of higher import taxes, and a still resilient US labor market, remain supportive of elevated US Treasury bond yields. This should continue to underpin the USD and cap the Gold price. Apart from this, hopes that trade deals could be struck before US President Donald Trump's August 1 deadline for reciprocal tariffs, and that a global trade war would be averted, might hold back the XAU/USD bulls from placing aggressive bets, warranting caution before positioning for any further appreciation.
Daily Digest Market Movers: Gold price benefits from modest USD weakness ahead of US CPI report
- The US Dollar retreats slightly from a multi-week top set the previous day amid some repositioning trade ahead of the latest US consumer inflation figures, due later this Tuesday, and lends support to the Gold price during the Asian session.
- The headline Consumer Price Index (CPI) is anticipated to rise 2.7% YoY in June, while the core gauge is seen coming in at 3.0% YoY. Even a slight disappointment would fuel speculations about an early interest rate cut by the Federal Reserve.
- Traders are currently assigning a 60% probability of a rate cut by September and at least 50 basis points worth of easing by the year-end. Hence, a softer print could weigh on the USD and provide a goodish lift to the non-yielding yellow metal.
- Meanwhile, the market reaction to stronger readings is more likely to be limited as persistent uncertainties surrounding US President Donald Trump's trade policies might continue to offer some support to the safe-haven XAU/USD pair.
- In fact, Trump issued tariff notices to more than 20 countries and announced a 50% tariff on copper imports last week. Trump, however, softened his stance on Monday and signaled that his administration was open to further trade negotiations.
- This, in turn, boosts investors' appetite for riskier assets, which is evident from a generally positive tone around the equity markets. Hence, some follow-through buying is needed to set the stage for a further XAU/USD appreciating move.
Gold price could reclaim $3,400 above $3,365 key resistance
From a technical perspective, a sustained strength beyond the $3,365-3,366 region might be seen as a fresh trigger for the XAU/USD bulls amid positive oscillators on hourly/daily charts. This, in turn, would set the stage for additional gains and allow the Gold price to reclaim the $3,400 round figure. Some follow-through buying has the potential to lift the commodity further towards the next relevant hurdle near the $3,434-3,435 area.
On the flip side, the $3,341-3,340 could offer immediate support, and any further slide could be seen as a buying opportunity near the $3,326 region. This should help limit the downside for the Gold price near the $3,300 round figure. This is followed by the $3,283-3,282 region, or over a one-week low touched last Tuesday, which, if broken, would make the XAU/USD pair vulnerable to accelerate the corrective fall towards the July swing low, around the $3,248-3,247 area.
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.
作者：Haresh Menghani，文章来源FXStreet，版权归原作者所有，如有侵权请联系本人删除。
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