Natural gas price activated the bearish correctional track after recording $4.160 level, affected by stochastic exit from the overbought level, activating the attempts of gathering gains by reaching $3.900.
Depending on forming extra support at $3.830 level, to reduce the risk of suffering extra losses, to keep waiting for gathering the positive momentum, which allows it to renew the bullish attempts and reaching $4.050 and $4.220.
The expected trading range for today is between $3.850 and $4.050
GBP/USD trades at a fresh monthly low below 1.3400 on Monday.
The US Dollar benefits from escalating geopolitical tensions.
The technical outlook suggests that there is more room on the downside.
After losing nearly 1% in the previous week, GBP/USD stays under bearish pressure on Monday and trades at its lowest level in a month below 1.3400. In case safe-haven flows continue to dominate the action in financial markets in the second half of the day, the pair could continue to stretch lower.
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the Euro.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
-0.08%
0.16%
0.83%
0.24%
0.77%
1.00%
0.12%
EUR
0.08%
0.23%
0.93%
0.33%
0.80%
1.07%
0.16%
GBP
-0.16%
-0.23%
0.77%
0.13%
0.58%
0.86%
-0.06%
JPY
-0.83%
-0.93%
-0.77%
-0.60%
-0.09%
0.23%
-0.78%
CAD
-0.24%
-0.33%
-0.13%
0.60%
0.57%
0.75%
-0.16%
AUD
-0.77%
-0.80%
-0.58%
0.09%
-0.57%
0.26%
-0.66%
NZD
-1.00%
-1.07%
-0.86%
-0.23%
-0.75%
-0.26%
-0.91%
CHF
-0.12%
-0.16%
0.06%
0.78%
0.16%
0.66%
0.91%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The negative shift seen in risk sentiment helps the US Dollar (USD) outperform its rivals and weighs on GBP/USD on Monday. Market participants grow increasingly worried about a widening and deepening conflict in the Middle East following the United States’ decision to strike three nuclear facilities in Iran over the weekend.
Meanwhile, the data from the UK showed that the business activity in the private sector expanded at an accelerating pace in June, with the S&P Global Composite Purchasing Managers Index (PMI) improving to 50.7 from 50.3 in May. This reading, however, failed to support Pound Sterling.
Later in the day, the US economic calendar will feature S&P Global PMI data for June. Markets expect the Manufacturing PMI to edge lower to 51 from 52 in May and see the Services PMI retreating to 52.9 from 53.7. In case either of these PMIs come in below 50, the USD could come under selling pressure. Nevertheless, the market reaction could remain short-lived in the current market environment, with investors staying focused on geopolitics. A further escalation in the Iran-Israel crisis could boost the USD and cause GBP/USD to extend its slide in the near term.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart declines toward 30 and GBP/USD continues to pull away from the 200-period Simple Moving Average (SMA), reflecting a buildup of bearish momentum.
On the downside, 1.3340 (Fibonacci 61.8% retracement of the latest uptrend) aligns as the next support level before 1.3300 (round level, static level) and 1.3260 (Fibonacci 78.6 retracement). Looking north, resistance levels could be spotted at 1.3400 (Fibonacci 50% retracement), 1.3450 (Fibonacci 38.2% retracement, 200-period SMA) and 1.3500 (static level, round level).
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data.
Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates.
When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money.
When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP.
A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Silver found support at $35.50 but seems unable to extend beyond $36.00.
Risk aversion is easing in the early European session, which is weighing on precious metals.
XAG/USD is forming a potential bearish H&S with its neckline at $35.45-$35.50,
Silver (XAG/USD) found a bottom near 35.50 following a reversal from multi-year highs at $37.30 last week, but the precious metal is struggling to find significant acceptance above $36.00 on Monday as the risk sentiment improved somewhat at the European session opening.
European bourses have opened with gains, except the UK FTSE100, and Wall Street futures are turning positive, despite ongoing fears about Iran’s retaliation to this weekend’s US attacks.
Iran’s army leaders have vowed severe consequences to the US, but so far, the response to the massive bombings of Iran’s key nuclear sites has been limited to missile strikes on Israel’s soil, sparing US interests in the region. This keeps hopes of avoiding a wider regional war alive for now, which is boosting equities and weighing on safe assets, such as silver.
XAG/USD: Potential Head & Shoulders formation
A view of the 4-hour charts, and we see a frail recovery from Friday’s lows at $35.50. The Relative Strength Index remains well into negative territory, suggesting that the bearish structure of the last three days is still in play, with previous support, at the $36.10 area (June 13, 16, and 17 highs), now acting as resistance.
Above here, the next resistance area is at the June 19 high at $36.82. A rejection here might form a bearish head & Shoulders, a potential topping pattern that would bring the focus back to the key $35.45-$35.50 area, June 12 and 20 lows, and the neckline of the H&S pattern.
A break of that level confirms that the bullish cycle from early May lows is over and that a deeper correction is in progress, with the next bearish targets at $34.10 (June 4 low) and the $32.70 area, which held prices on May 22, 27, 28, and 30.
XAG/USD 4-Hour Chart
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold’s. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold’s moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
EUR/USD trades below 1.1500 in the European session on Monday.
Mixed PMI data releases make it difficult for the Euro to find demand.
The US Dollar is likely to stay resilient against its rivals unless the risk mood improves.
EUR/USD struggles to gain traction and trades below 1.1500 to start the week. The near-term technical outlook highlights a buildup of bearish momentum. In the second half of the day, Purchasing Managers Index (PMI) data from the US and developments surrounding the Iran-Israel conflict could drive the US Dollar’s (USD) valuation and impact the pair’s action.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the US Dollar.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
-0.07%
0.07%
0.72%
0.24%
0.57%
0.76%
0.17%
EUR
0.07%
0.11%
0.83%
0.31%
0.60%
0.83%
0.20%
GBP
-0.07%
-0.11%
0.77%
0.20%
0.49%
0.73%
0.09%
JPY
-0.72%
-0.83%
-0.77%
-0.52%
-0.20%
0.08%
-0.64%
CAD
-0.24%
-0.31%
-0.20%
0.52%
0.37%
0.52%
-0.11%
AUD
-0.57%
-0.60%
-0.49%
0.20%
-0.37%
0.21%
-0.36%
NZD
-0.76%
-0.83%
-0.73%
-0.08%
-0.52%
-0.21%
-0.63%
CHF
-0.17%
-0.20%
-0.09%
0.64%
0.11%
0.36%
0.63%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Markets remain risk-averse and help the USD hold its ground on Monday after the United States (US) got involved in the Israel-Iran conflict by bombing three Iranian nuclear sites over the weekend.
Meanwhile, mixed PMI data releases from the Euro area seems to be making it difficult for the Euro to stage a rebound. HCOB Composite PMI in Germany improved to 50.4 in June’s flash estimate from 48.5 in May. In the same period, HCOB Composite PMI in the Eurozone remained unchanged at 50.2, missing the market expectation of 50.5.
In the second half of the day, S&P Global Manufacturing and Services PMI data for June will be featured in the US economic calendar. The market reaction to these data releases is likely to be straightforward and remain short-lived. Stronger-than-forecast PMI reading are likely to support the USD.
In the European morning, US stock index futures trade marginally higher after opening deep in negative territory. A bullish opening in Wall Street could weigh on the USD and help EUR/USD edge higher. Unless there is a de-escalation of the tensions in the Middle East, however, investors could refrain from taking large positions in risk-sensitive assets.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart declined below 40 and EUR/USD fell below the lower limit of the ascending regression channel, reflecting a buildup of bearish momentum.
EUR/USD faces a pivot level at 1.1460-1.1470, where the 100-period Simple Moving Average (SMA) and the lower limit of the ascending channel align. In case this area is confirmed as resistance, technical sellers could remain interested. In this scenario, 1.1420 (Fibonacci 38.2% retracement level of the latest uptrend) could be seen as the next support before 1.1360 (200-period SMA).
Looking north, resistance levels could be spotted at 1.1500 (Fibonacci 23.6% retracement), 1.1530 (50-period SMA) and 1.1570 (mid-point of the ascending channel).
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.
EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy.
The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.
Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency.
A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall.
Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Natural gas price activated the bearish correctional track after recording $4.160 level, affected by stochastic exit from the overbought level, activating the attempts of gathering gains by reaching $3.900.
Depending on forming extra support at $3.830 level, to reduce the risk of suffering extra losses, to keep waiting for gathering the positive momentum, which allows it to renew the bullish attempts and reaching $4.050 and $4.220.
The expected trading range for today is between $3.850 and $4.050
Platinum price activated the attempts of gathering the previously achieved gain, by forming a clear correctional decline in Friday, to settle below the extra support at $1275.00 level targeting $1244.00 as appears in the above image.
Reminding you that the stability above $1225.00 level until now might assist renewing the bullish attempts, to target $1300.00 and $1335.00 level, while its decline below this support and providing a negative close will confirm its readiness to resume the correctional decline, to wait for targeting $1210.00 and $1187.00.
The expected trading range for today is between $1225.00 and $1300.00
Silver price gains ground to around $36.10 in Monday’s early Asian session.
US attacked Iran over the weekend, boosting the white metal.
The preliminary US S&P Global PMI for June is due later on Monday.
The Silver price (XAG/USD) edges higher to near $36.10, snapping the three-day losing streak during the Asian trading hours on Monday. The white metal attracts some buyers amid the rising tensions in the Middle East after the US bombed Iran’s nuclear sites.
The United States carried out airstrikes on three nuclear sites in Iran early Sunday despite US President Donald Trump’s longtime promises to avoid new foreign conflicts. Iran has vowed to respond, saying it “reserves all options,” while Trump said that any Iranian retaliation against the United States “will be met with a force far greater than what was witnessed tonight.” Any signs of escalation could increase demand for safe-haven assets, such as Silver.
Federal Reserve (Fed) Governor Christopher Waller said on Friday that the Fed is in a position to cut the policy rate as early as July. The dovish remarks from Federal Reserve (Fed) officials provide some support for the white metal. Lower interest rates make silver cheaper for foreign buyers, increasing global demand.
On the other hand, renewed US Dollar (USD) demand might cap the upside of Silver. Investors await the preliminary reading of the US S&P Global PMI for June. If the US economic data came in stronger than expected, this could underpin the Greenback in the near term.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
Platinum price activated the attempts of gathering the previously achieved gain, by forming a clear correctional decline in Friday, to settle below the extra support at $1275.00 level targeting $1244.00 as appears in the above image.
Reminding you that the stability above $1225.00 level until now might assist renewing the bullish attempts, to target $1300.00 and $1335.00 level, while its decline below this support and providing a negative close will confirm its readiness to resume the correctional decline, to wait for targeting $1210.00 and $1187.00.
The expected trading range for today is between $1225.00 and $1300.00
Gold price closes in the bullish opening gap as sellers fight back control early Monday.
US Dollar strengthens on risk aversion due to the US involvement in the Israel-Iran conflict.
Gold price falls back to the critical 21-day SMA support at $3,351, with the bullish daily RSI.
Gold price has come under moderate selling pressure and reverts toward $3,350 early Monday, having faced rejection just shy of the $3,400 threshold.
Gold price awaits US PMIs, Fedspeak amid Middle East woes
In doing so, Gold price filled in the bullish opening gap of about $25, led by the market’s reaction to the weekend news of the US military involvement in the Israel-Iran conflict.
Early Sunday, US President Donald Trump announced that the United States (US) carried out airstrikes on three of Iran’s most critical nuclear sites, Fordow, Natanz and Isfahan.
In response, Supreme Leader Ayatollah Khamenei warned that American involvement would bring “irreparable damage.”
Markets fret over the Israel-Iran conflict translating into a wider Middle East regional war if Iran opts to retaliate with the closure of the Strait of Hormuz, which is the key passage of oil exports.
This nervousness has strengthened the haven demand for the US Dollar (USD), weighing on the USD-denominated Gold price.
Further, markets seem to believe that Iran may refrain from escalating the conflict by way of blocking the Strait of Hormuz even though its parliament has approved such a move.
This narrative appears to have reinforced selling in Oil prices, rendering negative for the inflation-hedge Gold price. Markets believed the Middle East escalation-driven surge in Oil price could stoke inflationary fears worldwide.
Attention now turns to the preliminary readings of S&P Global PMI data, especially from the Euro area and the US to gauge the health of the economies globally.
Downbeat data could rekindle global growth concerns, reviving the safe-haven appeal of the Gold price.
Additionally, if Iran retaliates firmly to the US bombing by accelerating its attacks on Israel and US bases, buyers could swing back in action amid investors’ run for cover in the ultimate traditional haven Gold price.
Speeches from several US Federal Reserve (Fed) policymakers will also be closely scrutinized after the Fed’s hawkish hold policy decision last week.
Gold price technical analysis: Daily chart
The daily chart shows that Gold price is back to testing the critical short-term support of the 21-day Simple Moving Average (SMA) at $3,351, breaching the 23.6% Fibonacci Retracement (Fibo) level of the April record rally once again at $3,377.
A failure to resist above the 21-day SMA on a daily closing basis will open up a fresh downtrend toward the 50-day SMA at $3,321, below which the 38.2% Fibo level at $3,297 will be threatened.
That said, Gold buyers remain hopeful so long as the 14-day Relative Strength Index (RSI) holds above the midline. The leading indicator is currently pointing south, near 53.
If the bright metal stages a comeback, it will need acceptance above the mentioned support-turned-resistance at $3,377.
The next topside target is seen at $3,400, above which the static resistance at $3,440 will be tested.
Buyers will then take on the two-month highs of $3,453.
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.
Gold price drifts higher to around $3,375 in Monday’s early Asian session.
The escalating tensions after the US bombed Iran’s nuclear sites have boosted the Gold price.
Fed’s Waller said the central bank is in position as early as July for cuts.
The Gold price (XAU/USD) climbs to near $3,375 during the early Asian session on Monday. US President Donald Trump’s decision to join Israel’s war against Iran sharply escalates the conflict, which lifts the precious metal. Traders will keep an eye on the preliminary reading of the US S&P Global Purchasing Managers Index (PMI) for June later on Monday.
The US carried out airstrikes on three nuclear sites in Iran early Sunday, directly entering Israel’s war with Iran despite Trump’s longtime promises to avoid new foreign conflicts. The escalating tensions after the US bombed Iran’s nuclear sites boost the safe-haven flows and benefit the Gold price, as it is traditionally considered a hedge during times of political and economic uncertainty.
Federal Reserve (Fed) Governor Christopher Waller said on Friday that the Fed is in a position to cut the policy rate as early as July. The dovish remarks from the Fed officials could weigh on the Greenback and provide some support to the USD-denominated commodity price, as a weaker USD makes Gold cheaper for foreign buyers.
Investors brace for the preliminary reading of US S&P Global PMI for June. Any surprise upside in the US economic data could lift the USD and cap the upside for the yellow metal.
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.
