In the world of commodities, the gold price (XAU/USD) has been on a rollercoaster ride. On Monday, it staged a remarkable intraday recovery from a three – week low of around the $2,972 – $2,971 region, which it hit during the Asian trading session. In the last hour of trading, it spiked to a new daily high of approximately $3,055. This upward movement was spurred by a confluence of factors.
Data released earlier in the day revealed that the People’s Bank of China (PBOC) had increased its state gold reserves for the fifth consecutive month. This continuous addition to reserves signaled China’s confidence in gold as a store of value. Additionally, the overall risk – off sentiment in the market, fueled by recession fears, bets on the Federal Reserve (Fed) resuming its rate – cutting cycle due to a tariffs – induced US economic slowdown, and geopolitical risks, all contributed to gold’s upward momentum. Gold, often considered a safe – haven asset, thrives in such uncertain market conditions.
Gains Fade Amid Market Uncertainty
However, the upward move in gold prices faded rapidly. Investors were busy unwinding their long positions in gold to offset losses incurred from the broader sell – off in global financial markets. The stock market sell – off, driven by concerns over a widening global trade war and its potential impact on the global economy, led many investors to liquidate their gold holdings for much – needed cash.
The US Dollar also played a role in capping gold’s gains. Despite the release of a stronger – than – expected US Nonfarm Payrolls (NFP) report on Friday, which showed that the economy added 228,000 jobs in March compared to the previous month’s revised figure of 117,000, the greenback struggled to fully capitalize on its recovery from a multi – month low.
Federal Reserve Chair Jerome Powell’s hawkish remarks, where he noted that inflation was close to the target but still slightly elevated and that Trump’s tariffs could have a strong inflationary impact, did not provide the dollar with enough upward impetus.
Still, the overall market sentiment was influenced by dovish Fed expectations. Traders were pricing in the likelihood that the Fed would resume its rate – cutting cycle in June and lower borrowing costs at least four times this year. This expectation kept the yield on the benchmark 10 – year US government bond below the 4.0% mark, which in turn restrained the dollar bulls. As a result, gold managed to hold above the crucial $3,000 mark.
Technical Outlook: A Pivotal Point for Gold
From a technical analysis perspective, last week’s sharp decline from the all – time high stalled just before reaching the 61.8% Fibonacci retracement level of the February – April upward move. The subsequent rally, however, encountered resistance near the $3,055 level, which was previously a support breakpoint but has now turned into a resistance level. This $3,055 mark is now a key pivot for intraday traders. If gold prices can break above this level, there is potential for the price to climb to the $3,080 region and eventually reach the $3,100 round figure.
On the downside, the $3,000 psychological mark, which aligns with the 50% retracement level, is currently acting as a buffer for the immediate downside. Below this, the $2,972 – $2,971 area, which was the multi – week low touched on Monday, and the 50 – day Simple Moving Average (SMA), around the $2,946 area, are important support levels. A decisive break below the 50 – day SMA could shift the near – term bias in favor of bearish traders, potentially leading to further price depreciation.
Gold in the Market Landscape
Gold has long been a favorite among investors. It serves as a store of value and a hedge against inflation and currency depreciation. Central banks are significant players in the gold market. In 2022, they added a record – high 1,136 tonnes of gold to their reserves, with emerging economies like China, India, and Turkey leading the way. This reflects their efforts to diversify reserves and strengthen their economic and currency positions.
Gold also has unique correlations with other assets. It has an inverse relationship with the US Dollar and US Treasuries. When the dollar weakens, gold prices tend to rise, allowing investors and central banks to diversify their portfolios during market volatility. Similarly, gold moves inversely to risk assets. A booming stock market often leads to a decline in gold prices, while a sell – off in riskier markets boosts gold’s appeal.
In conclusion, while gold managed to bounce back from multi – week lows, its future price movements remain uncertain. Traders and investors will closely monitor economic data, central bank policies, and geopolitical developments to gauge the precious metal’s next move.
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