Gold Price Forecast: XAU/USD posts modest gains above $3,300 as traders await US-China trade talks
- Gold price trades with mild gains around $3,325 in Tuesday’s early Asian session.
- US and China trade officials are scheduled to meet in London on Tuesday.
- China’s central bank added gold to its reserves in May for the seventh straight month.
The Gold price ( XAU/USD) posts modest gains to near $3,325 during the early Asian session on Tuesday, bolstered by a weaker US Dollar (USD). Investors await the ongoing US-China trade talks on Tuesday for fresh catalysts.
Trade talks between the United States (US) and China are scheduled to meet for a second day in London. US President Donald Trump said that the talks “should go very well.” US officials noted that it indicated to remove restrictions on some tech exports in exchange for assurances that China is easing limits on rare earth shipments, which are critical to a wide array of energy, defense and technology products.
Easing trade tensions could lift the Greenback and weigh on the USD-denominated commodity price. “In the short term, if there is a positive outcome of the meeting, it could be a little negative for gold, but not too much,” said Bart Melek, head of commodity strategies at TD Securities.
On the other hand, the persistent geopolitical risks in the Middle East might boost the safe-haven flows, supporting the yellow metal. Israel’s Foreign Ministry said that the detained crew of the Gaza-bound aid ship that was intercepted by Israel on Monday morning docked in the Israeli port of Ashdod Monday evening.
Data over the weekend showed that the People's Bank of China (PBoC), China’s central bank, bought Gold for the seventh straight month in May. This, in turn, could contribute to the Gold price. PBoC’s gold reserves rose to 73.83 million fine troy ounces at the end of May from 73.77 million ounces at the end of April.
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.
