Gold Price Forecast: XAU/USD holds above $2,900 amid global uncertainty, weaker US job data
- Gold price drifts higher to around $2,915 in Monday’s early Asian session.
- Global uncertainty and Trump’s tariff threats support the Gold price.
- The weaker US February job reports drag the US Dollar lower.
Gold price ( XAU/USD) attracts some buyers to around $2,915 during the early Asian session on Monday. Global uncertainty and the threat of a global trade war by US President Donald Trump provide some support to the precious metal.
Last week, US President Donald Trump on Thursday issued an executive order exempting goods from both Canada and Mexico under a North American trade agreement, known as USMCA, two days after imposing them. However, US Commerce Secretary Howard Lutnick said late Sunday that the 25% tariffs on steel and aluminum imports, set to take effect on Wednesday, are unlikely to be postponed. The uncertainty surrounding Trump’s tariff policies is likely to boost safe-haven flows, benefiting the Gold price in the near term.
Furthermore, the labor market in the United States (US) slowed last month. The report suggested that the Federal Reserve (Fed) remained on track to cut interest rates multiple times this year. This, in turn, weighs on the US Dollar (USD) and lifts the USD-denominated commodity price.
Data released by the US Bureau of Labor Statistics (BLS) on Friday revealed that the US Nonfarm Payrolls (NFP) increased by 151,000 in February, followed by the 125,000 increase (revised from 143,000) reported in January. This figure came in weaker than the market expectation of 160,000.
Meanwhile, the Unemployment Rate ticked higher to 4.1% from 4.0% in January, while the annual wage inflation, as measured by the change in the Average Hourly Earnings, climbed to 4.0% from 3.9% (revised from 4.1%).
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.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
