- Gold price ticks higher for the second straight day amid a combination of supporting factors.
- Trade jitters act as a tailwind for the safe-haven XAU/USD pair on the back of a softer USD.
- Declining US bond yields and Fed rate cut bets further benefit the non-yielding yellow metal.
Gold price (XAU/USD) retains positive bias for the second straight day on Thursday, though the lack of follow-through buying warrants caution before positioning for an extension of the overnight bounce from a one-and-a-half-week low. Traders pared bets on the number of interest rate cuts by the Federal Reserve (Fed) this year following the release of the upbeat US employment data last Thursday. Moreover, Minutes from the June FOMC meeting released on Wednesday revealed that only a couple of officials felt interest rates could fall as soon as this month amid inflation concerns on the back of US tariffs. This acts as a tailwind for the US Dollar (USD) and acts as a headwind for the non-yielding yellow metal.
Traders, however, seem convinced that the Fed will lower borrowing costs further by the end of this year. This, along with a strong demand at the 10-year government debt auction on Wednesday, leads to a further decline in the US Treasury bond yields and keeps the USD bulls on the defensive. Apart from this, concerns about the potential economic fallout from US President Donald Trump’s trade tariffs remain supportive of a mild bid tone around the safe-haven Gold price. Traders now look to the release of US Weekly Jobless Claims data and Fed speaks for short-term impetus.
Daily Digest Market Movers: Gold price bulls seem reluctant amid reduced Fed rate cut bets
- US President Donald Trump issued tariff notices to eight minor trading partners on Wednesday and said that there will be no extensions for the countries that receive letters. Furthermore, Trump stressed that any retaliatory levies will be added to the existing US tariffs.
- Adding to this, Trump announced that the 50% tariff on copper imports will take effect on August 1. This adds a layer of uncertainty in the markets and turns out to be a key factor driving some follow-through safe-haven flows towards the Gold price on Thursday.
- Minutes from the Federal Reserve’s June 17-18 policy meeting revealed that most policymakers remain worried about the risk of rising inflationary pressure on the back of Trump’s aggressive trade policies. Moreover, some policymakers felt that no rate cut would be needed at all.
- However, most participants expected that rate cuts would be appropriate later this year and that any price shock from tariffs would be temporary or modest. This contributed to the fall in the US Treasury bond yields, triggered by a strong 10-year government debt auction.
- The US Dollar extends its retracement slide from a two-week high for the second straight day and turns out to be another factor that benefits the XAU/USD pair. Traders now look forward to the release of US Weekly Jobless Claims and speeches by Fed officials for a fresh impetus.
Gold price seems vulnerable while below the 100-SMA pivotal hurdle on 4-hour chart
From a technical perspective, the 100-period Simple Moving Average (SMA) on the 4-hour chart, currently pegged near the $3,335 region, could cap any subsequent move up for the Gold price. This is followed by the $3,358-3,360 supply zone, which, if cleared, might trigger a short-covering move and allow the XAU/USD pair to reclaim the $3,400 round figure.
On the flip side, weakness below the $3,300 mark would expose the overnight swing low, around the $3,283-3,282 region. Some follow-through selling would make the Gold price vulnerable to accelerate the fall towards retesting the July monthly swing low, around the $3,248-3,247 region.
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.
Source: https://www.fxstreet.com/news/gold-price-trades-with-a-positive-bias-above-3-300-but-bullish-conviction-lacking-202507100419