Gold gains despite Powell’s pushback, trade uncertainty
- Gold surged $90 this week as a weaker US Dollar met rising concerns over global trade and geopolitical instability.
- Fed’s Daly struck a hawkish tone, similar to Powell, suggesting policy remains tight and the neutral interest rate might be creeping upwards.
- Looking ahead to next week, traders are keenly anticipating key US economic data, including Flash PMIs, Durable Goods Orders, and the final reading on Consumer Sentiment.
Gold is wrapping up the week in winning territory, boasting gains of over 2.79%. The precious metal has enjoyed a robust $90 rally against the US Dollar, benefiting from the dollar’s recent dip amid global trade worries. Currently, XAU/USD is trading at $3,326.
XAU/USD Holds Steady at $3,326 After Briefly Touching a Record High of $3,358; Real Yields Climb but Profit-Taking After Long Weekend Limits Further Gains
Markets in Europe and the US are quiet today, observing the Easter long weekend, resulting in a lighter news cycle. However, San Francisco Fed President Mary Daly offered some insights, noting that while the economy is generally healthy, some sectors are experiencing a slowdown. She reiterated that current monetary policy is still restrictive and effectively curbing inflation, and also suggested that the neutral rate of interest “may be rising.”
After reaching a fresh all-time high (ATH) of $3,358, gold prices experienced a dip as traders opted to secure profits heading into the extended weekend. Adding to the cautious mood, Fed Chair Jerome Powell’s hawkish remarks on Wednesday tempered the precious metal’s advance. Despite these factors, ongoing uncertainties surrounding US trade policies and global geopolitical risks could continue to provide a floor for Gold prices.
Yields edged higher, with the benchmark US 10-year Treasury note yield increasing by five basis points to 4.333%. Notably, US real yields, which reflect the yield after accounting for inflation expectations, also climbed five basis points to 2.163%. This rise in real yields typically acts as a headwind for Gold, making it less attractive compared to yield-bearing assets.
Looking to the week ahead, the US economic calendar is jam-packed. We’ll be hearing from a number of Fed officials, and key data releases will include the S&P Global Flash PMIs, Durable Goods Orders, and the final University of Michigan Consumer Sentiment reading.
XAU/USD Price Forecast: What the Technicals Are Saying
Despite Thursday’s slight pullback below the $3,330 level, gold’s overall upward trend remains firmly in place. The recent bounce back from those losses, without significant further selling, indicates that traders aren’t readily accepting prices at lower levels. This keeps the door open for potential further gains.
Looking at momentum indicators, the Relative Strength Index (RSI) is still in overbought territory, although it hasn’t yet hit the extreme level of 80. However, with the RSI starting to turn downwards, we might be seeing the beginnings of a move back towards its average level.
If this pullback gains traction, initial support is anticipated around $3,300, followed by the April 16th low at $3,229. On the flip side, if prices can push above $3,350, it could pave the way for a retest of the year-to-date (YTD) high, with the next upside target potentially around $3,400.
Gold FAQs
Throughout history, gold has been incredibly important, serving as both a valuable store of wealth and a common medium for exchange. Today, beyond its beauty and use in jewelry, gold is widely regarded as a safe-haven asset. This means it’s considered a solid investment during times of economic uncertainty. Gold also acts as a popular hedge against inflation and the weakening of currencies, as its value isn’t tied to any single government or issuer.
Central banks are the biggest holders of gold globally. To bolster their currencies during periods of instability, they often diversify their reserves by purchasing gold. This is seen as strengthening the perceived health of their economy and currency. Substantial gold reserves can inspire confidence in a nation’s financial stability. According to the World Gold Council, in 2022, central banks collectively added a massive 1,136 tonnes of gold to their reserves, valued at roughly $70 billion. This marks the largest annual purchase since record-keeping began, with emerging economies like China, India, and Turkey rapidly increasing their gold holdings.
Gold typically moves in the opposite direction to the US Dollar and US Treasuries, both of which are also considered major reserve assets and safe havens. When the Dollar loses value, gold tends to gain, providing investors and central banks with an opportunity to diversify their assets during turbulent periods. Gold also shows an inverse relationship with riskier assets. Strong performance in the stock market often puts downward pressure on gold prices, while sell-offs in riskier markets generally make the precious metal more appealing.
A wide array of factors can influence gold’s price. Geopolitical instability or fears of a significant recession can quickly drive gold prices higher due to its safe-haven status. As an asset that doesn’t generate yield, gold tends to benefit from lower interest rates, while higher borrowing costs usually weigh on its price. However, price movements are often most heavily influenced by the US Dollar’s performance, as gold is priced in dollars (XAU/USD). A strong Dollar generally keeps gold prices in check, while a weaker Dollar is likely to push gold prices upwards.
