- Gold price briefly falls below the $3,000 mark in early Monday trading.
- Markets still favor Bullion as the safer bet for a stagflation scenario in the US.
- Gold tries to recover back to its opening price near $3,037.
Gold price (XAU/USD) recovers and trades near $3,030 at the time of writing on Monday after falling 2% intraday in early trading as the trade war spirals out of control. Bullion could not withstand selling pressure with Stocks, the US Dollar (USD) and yields all dropping lower on Monday. With China issuing its own retaliatory tariffs against the United States (US), markets are holding their breath for any further response from other countries.
Meanwhile, investors will shift their focus to the US inflation data this week. Slowly but surely, the focus will now shift to the US economic data, which will bear its mark from the Donald Trump presidency. Markets will want to assess the impact of US President Donald Trump politics and how much it weighs on the US economic data. This Monday, traders are even pricing in five interest rate cuts from the Federal Reserve (Fed) this year.
Daily digest market movers: Alerts flashing
- American billionaire hedge fund manager and chief executive officer of Pershing Square Capital Management William Albert Ackman asked President Trump on X to pause the current trade tariffs in order to first broker a trade deal. Ackman warns that Trump is losing business leaders’ confidence, Reuters reports.
- The CME FedWatch tool shows chances for an interest rate cut by the Fed in May standing at 49.3%, shooting up from 33.3% on Friday as rate cut bets grow. For June, a rates remaining steady scenario is out of the options. Only rate cuts are being pencilled in with a 53.5% chance of policy rate being cut to the 3.75%-4.00% range from the current 4.25%-4.50%.
- China’s central bank, the People’s Bank of China (PBOC), added Gold to its reserves for a fifth straight month in March, deepening its bet on the precious metal as a haven asset amid rising global trade and geopolitical turmoil. Gold held by the PBOC rose by 0.09 million troy ounces last month, according to data released on Monday. The central bank’s recent run of buying started in November, after a six-month hiatus that followed an 18-month buying spree, Bloomberg reports.
Gold Price Technical Analysis: Will revisit all-time highs?
Bullion is trying to contain the situation with the global market rout really spreading out. Certainly, many Bullion bulls will have bought any offer below $3,000, which is why Gold quickly recovered back above $3,000 intraday. Look for the nearby double resistance around $3,060 that could limit the Gold price briefly.
Looking up, a double resistance sits around the $3,060 area, with $3,057 as a technical level and the Daily Pivot at $3,063. Should that level be broken down, the road is open for the intraday R1 resistance at $3,111. Further up, the current all-time high can be seen as the last upside level for now at $3,167.
On the downside, the pivotal level at $3,004 and the S1 support at $2,990 have been torn down briefly. Clearly, many buyers were interested in scooping up Gold at these levels. Should Gold fall back below $3,000, the pivotal level at $2,955 and the S2 support at $2,942 should be able to refrain Gold from falling below $2,940.
XAU/USD: Daily Chart
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.