Created
: 2025.06.05
2025.06.05 13:32
Gold price (XAU/USD) edges lower following an Asian session uptick to the $3,384 area amid a slight US Dollar (USD) bounce, though the near-term bias seems tilted firmly in favor of bullish traders. Weaker-than-expected US economic data released on Wednesday boosted market expectations that the Federal Reserve (Fed) will lower borrowing costs further in 2025. This keeps the US Treasury bond yields depressed, which, along with US fiscal concerns, should cap the USD and lend support to the non-yielding yellow metal.
Apart from this, persistent trade-related uncertainties and rising geopolitical tensions validate the near-term positive outlook for the safe-haven Gold price. Investors, however, seem reluctant and opt to wait for the high-stakes call between US President Donald Trump and Chinese President Xi Jinping. Moreover, volatility is expected to remain suppressed ahead of the crucial US Nonfarm Payrolls (NFP) report on Friday, which might further hold back traders from placing aggressive directional bets around the precious metal.
From a technical perspective, this week's breakout above the $3,324-3,326 barrier was seen as a key trigger for 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 remains to the upside. However, it will be prudent to wait for some follow-through buying above the $3,385 region, or a multi-week top touched on Tuesday, before positioning for further gains. The XAU/USD pair might then surpass the $3,400 mark and climb further to the $3,433-3,435 region. The momentum could extend further toward the $3,500 neighborhood or the all-time peak set in April.
On the flip side, the $3,355 area could offer immediate support to the Gold price. Any further slide 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
: 2025.06.05
Last updated
: 2025.06.05
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