Created
: 2025.06.03
2025.06.03 13:38
Gold price (XAU/USD) retreats from the vicinity of the $3,400 round-figure mark, or a nearly four-week peak touched during the Asian session on Tuesday and erodes a part of the previous day's strong gains. A modest US Dollar (USD) recovery from the lowest level since April 22 is seen as a key factor exerting some pressure on the commodity. Apart from this, a generally positive tone around the equity markets seems to undermine demand for the safe-haven precious metal.
However, persistent trade-related uncertainties and rising geopolitical tensions might keep a lid on any optimism in the markets. Adding to this, bets that the Federal Reserve (Fed) will lower borrowing costs again, along with concerns about the worsening US fiscal condition, should cap any meaningful USD appreciation and help limit deeper losses for the Gold price. This, in turn, warrants some caution for the XAU/USD bears and positioning for a further intraday downfall.
From a technical perspective, the overnight breakout through the $3,324-3,326 hurdle and a subsequent strength beyond the $3,355 area was seen as a key trigger for the XAU/USD bulls. Moreover, oscillators on daily/hourly charts are holding comfortably in positive territory and suggest that the path of least resistance for the Gold price is to the upside. Hence, any subsequent slide below the $3,355 area could be seen as a buying opportunity and remain limited near the $3,326-3,324 resistance-turned-support. Some follow-through selling, however, could make the commodity vulnerable to weakening further below the $3,300 mark and testing the $3,286-3,285 horizontal support.
On the flip side, bulls might now wait for a move beyond the $3,400 round figure before positioning for a move toward the next relevant resistance near the $3,430-3,432 area. A sustained strength beyond the latter should allow the Gold price to retest the all-time peak touched in April and make a fresh attempt to conquer the $3,500 psychological mark.
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.
Created
: 2025.06.03
Last updated
: 2025.06.03
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