Created
: 2025.06.04
2025.06.04 13:08
Gold price (XAU/USD) attracts some dip-buyers during the Asian session on Wednesday and reverses a part of the previous day's retracement slide from a nearly four-week top. The US Dollar (USD) struggles to capitalize on Tuesday's goodish bounce from a six-week trough amid the growing acceptance that the Federal Reserve (Fed) will cut interest rates further amid signs of easing inflationary pressures. This, in turn, assists the non-yielding yellow metal to regain positive traction.
Apart from this, persistent geopolitical risks and trade-related uncertainties turn out to be other factors acting as a tailwind for the safe-haven Gold price. The XAU/USD bulls, however, might refrain from placing aggressive bets ahead of a potential call between US President Donald Trump and his Chinese counterpart Xi Jinping. This, along with a generally positive tone around the equity markets, should contribute to capping gains for the commodity ahead of important US macro releases.
From a technical perspective, the emergence of dip-buying on Wednesday comes on top of this week's breakout through the $3,324-3,326 barrier. 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. However, any subsequent move up could face some resistance near the $3,380 region ahead of the $3,400 neighborhood or a multi-week high touched on Tuesday. A sustained strength beyond the latter should allow the XAU/USD pair to retest the all-time peak touched in April and make a fresh attempt to conquer the $3,500 psychological mark.
On the flip side, weakness below the $3,355 area might continue to attract some dip-buyers and is more likely to remain limited near the aforementioned resistance breakpoint, around the $3,326-3,324 area. 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.
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
: 2025.06.04
Last updated
: 2025.06.04
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