Gold Price Forecast: XAU/USD edges lower to near $3,300 as US-China trade tensions ease
- Gold Price loses ground to near $3,310 in Monday’s early Asian session, down 0.30% on the day.
- De-escalating trade tensions between the US and China underpins the Gold price.
- The fears of the US recession might help limit the Gold’s losses.
The Gold price (XAU/USD) drifts lower to around $3,310 during the early Asian session on Monday. The precious metal retreats after hitting its record high last week amid signs that global trade tensions may be easing.
US Agriculture Secretary Brooke Rollins said on Sunday that the Trump administration is having daily conversations with China over tariffs, per Reuters. Rollins noted that there were ongoing talks between the two nations and that trade deals with other nations were “very close.”
“Headlines over potential, partial exemptions in retaliatory tariffs further boosted sentiment today and allowed gold to dip below $3,300 levels,” said Yuxuan Tang, a strategist at JPMorgan Private Bank.
On the other hand, US President Donald Trump’s announcement of broad and steep tariffs earlier in April prompted fears of the US economy tipping into a recession in recent weeks. The International Monetary Fund (IMF) warned last week that the US is confronting an increased risk of recession as Trump’s trade war pushes the global economy into a significant slowdown. This, in turn, could boost the Gold price, a traditional safe-haven asset.
Gold traders will closely monitor the preliminary reading of US Gross Domestic Product (GDP) for the first quarter (Q1), which is due later on Wednesday. On Friday, the attention will shift to the US April employment report, including Nonfarm Payrolls (NFP), Unemployment Rate and Average Hourly Earnings.
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.