Created
: 2025.07.10
2025.07.10 06:20
Gold price registers decent gains on Wednesday as US Treasury yields recede, even though the Greenback trades solidly against its peers. Trade developments continued to dictate the market's direction, while the latest minutes indicate that officials are still considering a rate cut in 2025. At the time of writing, the XAU/USD trades at $3,312, up 0.31%.
The Fed's minutes showed that most officials see a rate cut to the Fed funds rate this year as appropriate, while a couple are considering a reduction in July, if data evolves as expected.
The White House continues to deliver blows to minor and major trading partners, releasing the latest batch of letters to countries like the Philippines, Moldova, Algeria, Iraq, Libya, Brunei, and Sri Lanka. Duties were set at around 20% to 30% for the countries mentioned.
On Wednesday, the US President Donald Trump emphasized that he would apply 10% additional tariffs to countries aligning themselves with anti-American policies of the BRICS.
Data from the Chicago Board of Trade revealed that market players are eyeing 50 basis points (bps) of easing in 2025.
Gold price upward bias is intact, though it would be facing stiff resistance in the near-term. Although the Relative Strength Index (RSI) is aiming up, it remains bearish, an indication that clearing the 50-day Simple Moving Average (SMA) resistance level at $3,319 would be hard to accomplish. In that outcome, the next ceiling level would be the 20-day SMA at $3,345, $3,350 ahead of $3,400.
Conversely, if XAU/USD tumbles below $3,300, the first support would be the June 30 low of $3,246 to pave the way for further downside, with the 100-day Simple Moving Average (SMA) at $3,185 eyed, followed by the May 15 low of $3,120.
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
: 2025.07.10
Last updated
: 2025.07.10
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