• Gold price flirts with record highs near $3,220 in early Europe on Friday.
  • Deepening US-China trade war and US economic concerns underpin the Gold price. 
  • Gold price looks to the US PPI inflation data and tariff talks for further cues.  

Gold price (XAU/USD) keeps its range close to fresh all-time highs near $3,220 in early Europe on Friday. The US Dollar (USD) downward spiral and escalating trade war between the United States (US) and China continue to underpin the safe-haven appeal of Gold price.

Data released by the US Bureau of Labor Statistics (BLS) on Thursday revealed that US consumer prices unexpectedly fell in March, but inflation risks are tilted to the upside after US President Donald Trump doubled down on China tariffs. The US CPI inflation eased to 2.4% YoY in March from 2.8% in February. This reading came in below the market expectation of 2.6%.

The core CPI, which excludes volatile food and energy prices, increased 2.8% YoY in March, compared to a rise of 3.1% seen in February and came in below the consensus of 3.0%. On a monthly basis, the headline CPI declined 0.1%, while the core CPI rose 0.1%. 

Trump said on Wednesday he would temporarily lower duties on dozens of countries. However, Trump also raised tariffs on China to 125%, effective immediately, after Beijing announced plans to retaliate with 84% duties. The worries over the global economy and the renewed trade tensions between the world’s two biggest economies keep investors in safe-haven assets, supporting the Gold price. 

"Gold regains its safe-haven appeal and gets back on track for new all-time highs," said Nikos Tzabouras, Senior Market Analyst at Tradu.com.

Additionally, increased dovish bets surrounding Federal Reserve (Fed) rate cuts this year exacerbate the Greenback's pain, strengthening the USD-denominated commodity price. Traders continue pricing three or four rate cuts this year.

Gold price technical analysis: More gains remain in the offing

The daily chart shows that the 14-day Relative Strength Index (RSI) is prodding the overbought region at 70, suggesting more room for upside before the buyers’ exhaustion sets in.

The immediate resistance is seen at the $3,250 psychological level, above which a fresh uptrend toward the $3,300 threshold would be in the offing.  

On the downside, the initial demand area is seen at $3,200, below which the 21-day Simple Moving Average (SMA) resistance-turned-support at $3,061 could come into play.

If the correction extends, the $3,000 mark will be the last line of defense for buyers.

US Dollar PRICE This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Swiss Franc.

  USD EUR GBP JPY CAD AUD NZD CHF
USD   -2.99% -0.98% -1.45% -2.07% -2.61% -3.42% -4.02%
EUR 2.99%   2.36% 2.20% 1.58% 0.32% 0.18% -0.45%
GBP 0.98% -2.36%   -1.42% -0.77% -1.99% -2.13% -2.74%
JPY 1.45% -2.20% 1.42%   -0.59% -0.21% -0.76% -2.25%
CAD 2.07% -1.58% 0.77% 0.59%   -0.90% -1.38% -2.25%
AUD 2.61% -0.32% 1.99% 0.21% 0.90%   -0.15% -0.77%
NZD 3.42% -0.18% 2.13% 0.76% 1.38% 0.15%   -0.62%
CHF 4.02% 0.45% 2.74% 2.25% 2.25% 0.77% 0.62%  

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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

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.

Source: Fxstreet