Gold Price Forecast: XAU/USD slumps below $4,800 as Trump backs off European tariff threat
|- Gold price tumbles to around $4,790 in Thursday’s early Asian session.
- Optimism after Trump backed off the European tariff threat dampened safe-haven demand.
- Traders brace for the US economic data on Thursday for fresh impetus.
Gold price ( XAU/USD) trimmed gains to near $4,790 during the early Asian session on Thursday. The precious metal retreats from a record high of $4,888 after US President Donald Trump backs off the European tariff threat and announces a framework Greenland deal.
Bloomberg reported on Wednesday that Trump said he would step back from imposing tariffs on goods from European nations opposing his effort to take possession of Greenland. He added that the United States and the North Atlantic Treaty Organization (NATO) had "formed the framework of a future deal with respect to Greenland.” Hopes for a solution in Trump’s ambitions for Greenland that would avoid tariffs could undermine traditional safe-haven assets such as Gold in the near term.
“Gold may be pausing, but the bull market is very much intact — with rate‑cut expectations, persistent geopolitical tensions and strong central‑bank buying keeping the risk skewed firmly to the upside,” said Ewa Manthey, commodities strategist at ING Groep NV.
Nonetheless, Trump did not detail the parameters of the so-called “framework,” and it was unclear what the agreement entails. Germany's Finance Minister Lars Klingbeil warned against premature optimism after Trump backed off threats to impose tariffs as leverage to seize Greenland. Any signs of escalating tensions between the US and the EU could boost the yellow metal.
Traders await the final reading of US Gross Domestic Product (GDP) for the third quarter (Q3), weekly Initial Jobless Claims and Personal Consumption Expenditures (PCE) Price Index data, which are due later on Thursday. In case of the weaker-than-expected outcomes, this could weigh on the US Dollar (USD) and underpin the USD-denominated commodity price.
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.
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