Gold Price Forecast: XAU/USD posts modest gains above $3,150 on better risk appetite
- Gold price recovers some lost ground to around $3,180 in Thursday’s early Asian session.
- Easing tensions in the global trade war undermines the Gold price.
- US April Retail Sales and PPI reports will be in the spotlight later on Thursday.
The Gold price (XAU/USD) trades with mild gains near $3,180 during the early Asian session on Thursday. However, the potential upside for the yellow metal might be capped in the near term due to better risk appetite and progress in trade talks.
The precious metal remains on the defensive as tension eases in the global trade war, pushing investors away from safe-haven demand. The US and China agreed to reduce tariffs on each other after two days of negotiations in Geneva, Switzerland. The US lowered tariffs on Chinese imports to 30% from 145%, while China cut tariffs on US imports to 10% from 125%.
“Overall it’s an improved risk sentiment that for now has reduced gold’s appeal,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S.
A top adviser to Iran’s supreme leader, Ali Shamkhani, said late Wednesday that Iran is ready to sign a nuclear deal with certain conditions with US President Donald Trump in exchange for lifting economic sanctions. These positive developments contribute to the Gold’s downside.
However, trade uncertainties and escalating geopolitical risks could help limit the Gold’s losses. Traders will keep an eye on the release of the US Retail Sales and Producer Price Index (PPI) for April later on Thursday. Also, the Federal Reserve (Fed) Chair Jerome Powell is set to speak.
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.