Gold price recovers further from one-month low amid a weaker USD
- Gold price attracts buyers for the second straight day amid a combination of supporting factors.
- Fed rate cut bets drag the USD to a multi-year low and underpin the non-yielding yellow metal.
- The uncertainty over Trump’s policies offsets the positive risk tone and benefits the XAU/USD pair.
Gold price (XAU/USD) is building on the previous day's goodish recovery from the $3,248-3,247 region or a one-month low and gaining positive traction for the second successive day on Tuesday. The US Dollar (USD) selling remains unabated on the back of the growing acceptance that the Federal Reserve (Fed) would resume its rate-cutting cycle in the near future, which turns out to be a key factor acting as a tailwind for the non-yielding bullion. Apart from this, the heightened uncertainty over US President Donald Trump's tariff policies ahead of the July 9 deadline lifts the safe-haven Gold price above the $3,320 level during the Asian session.
Meanwhile, Asia stocks track the overnight rally in the S&P 500 and Nasdaq to fresh record closing highs. This might hold back traders from placing aggressive bullish bets around the Gold price ahead of this week's important US macro releases, starting with the ISM Manufacturing PMI and the Job Openings and Labor Turnover Survey (JOLTS) later this Tuesday. The focus, however, remains glued to the US Nonfarm Payrolls (NFP) report on Friday, which will influence the USD price dynamics and provide a fresh impetus to the commodity. Nevertheless, the fundamental backdrop backs the case for a further appreciation move for the XAU/USD.
Daily Digest Market Movers: Gold price benefits from weaker USD and trade jitters
- US President Donald Trump expressed frustration over stalled US-Japan trade negotiations and also threatened to raise tariffs on certain countries as his July 9 deadline approaches. Adding to this, White House spokesperson Karoline Leavitt said that Trump would meet with his trade team to set tariff rates for countries if they don't come to the table to negotiate in good faith.
- Meanwhile, US Treasury Secretary Scott Bessent warned that countries could be notified that tariff rates are scheduled to rise sharply from a temporary 10% level to rates of 11% to 50% announced on April 2. This, in turn, drives some safe-haven flows during the Asian session on Tuesday and assists the Gold price to build on the overnight goodish recovery move.
- Trump steps up his pressure campaign on Federal Reserve Chair Jerome Powell to lower borrowing costs in a handwritten note on Monday. This comes after the US Personal Consumption Expenditures (PCE) report showed on Friday that consumer spending unexpectedly declined in May and keeps the door open for further monetary policy easing by the central bank.
- The markets are currently pricing in a smaller chance that the next rate reduction by the Fed will come in July and see a roughly 74% probability of a rate cut as soon as September. This, along with concerns about the worsening US fiscal condition, drags the US Dollar to its lowest level since February 2022 on Tuesday and lends additional support to the XAU/USD pair.
- The Senate narrowly approved a procedural vote to open debate on Trump’s comprehensive “One Big Beautiful Bill,” which would add approximately $3.3 trillion to the federal deficit over the next decade. This should keep the USD on the defensive ahead of this week's key US macro releases and support prospects for a further appreciating move for the commodity.
- Traders now look forward to the release of the US ISM Manufacturing PMI and Job Openings and Labor Turnover Survey (JOLTS) for some impetus later during the North American session. The focus, however, will remain glued to the closely-watched US monthly employment details, popularly known as the Nonfarm Payrolls (NFP) report on Thursday.
Gold price could accelerate the positive move above the $3,324-3,325 immediate barrier
From a technical perspective, any subsequent strength beyond the $3,324-3,325 immediate hurdle could attract some sellers near the $3,350 region. This is followed by resistance near the $3,368-3,370 region, above which the Gold price could accelerate the positive move and aim toward reclaiming the $3,400 mark. A sustained strength beyond the latter would shift the near-term bias in favor of the XAU/USD bulls and pave the way for additional gains.
On the flip side, the $3,300 round figure now seems to protect the immediate downside ahead of the $3,277-3,276 horizontal support and the overnight swing low, around the $3,246-3,245 region. Failure to defend the said support levels could make the Gold price vulnerable to accelerate the fall towards testing the $3,210-$3,200 intermediate support before eventually dropping to the $3,175 area amid slightly negative oscillators on the 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.