- Gold price eases from a near three-month peak touched on Wednesday amid a modest USD uptick.
- Bets for further interest rate cuts by the Fed hold back the USD bulls from placing aggressive bets.
- Concerns about Trump’s tariff plans further contribute to limiting deeper losses for the XAU/USD.
Gold price (XAU/USD) remains depressed through the first half of the European session on Thursday and for now, seems to have snapped a three-day winning streak to its highest level since early November touched the previous day. The US Dollar (USD) gains some positive traction for the second straight day and recovers further from the monthly low. This, along with a stable performance around the equity markets, turn out to be key factors undermining the safe-haven precious metal.
That said, bets that the Federal Reserve (Fed) will cut rates twice this year keep a lid on the US Treasury bond yields, which, in turn, should cap the USD and offer some support to the non-yielding Gold price. Furthermore, uncertainty over US President Donald Trump’s trade policies, which could trigger trade wars and elevate market volatility, should help limit losses for the XAU/USD. This warrants caution before confirming that the one-month-old uptrend has run out of steam.
Gold price retains negative bias amid modest USD strength; downside remains cushioned
- The US Dollar holds steady above its lowest level since late December touched on Wednesday amid a modest rebound in the US Treasury bond yields and prompts some selling around the Gold price on Thursday.
- The lack of details about US President Donald Trump's tariff plans and easing geopolitical tensions remain supportive of the risk-on mood, which is seen as another factor undermining the safe-haven precious metal.
- Trump's proposed policies are broadly regarded as inflationary, which, in turn, might compel the Federal Reserve to stick to its hawkish stance and keep interest rates higher for longer to rein in rising price pressures.
- Investors, however, are still pricing in the possibility that the US central bank will lower borrowing costs at least two times by the end of this year. This might cap the upside for the US bond yields and the Greenback.
- Trump's speech at the World Economic Forum will be looked upon for more concrete announcements on tariffs. Apart from this, the release of the US Weekly Jobless Claims should provide some impetus to the XAU/USD.
- The Bank of Japan is scheduled to announce its decision at the end of a two-day policy meeting on Friday and is expected to raise interest rates from 0.25% to 0.50%, or the highest since the 2008 global financial crisis.
- Rate decisions from the Fed and European Central Bank are scheduled for Wednesday and Thursday next week, respectively, which could infuse volatility and provide some impetus to the non-yielding yellow metal.
Gold price bulls have the upper hand while above the $2,720-2,25 resistance breakpoint
From a technical perspective, any subsequent slide is more likely to find decent support near the $2,625-2,620 strong horizontal resistance breakpoint, now turned support. Some follow-through selling could drag the Gold price to the $2,700 mark, which if broken decisively should pave the way for deeper losses. The XAU/USD might then fall towards the $2,665-2,662 area en route to the 2,627-2,622 confluence. The latter comprises the 100-day Exponential Moving Average (EMA) and a short-term ascending trend line, which, in turn, should act as a key pivotal point for short-term traders.
On the flip side, the overnight swing high, around the $2,763-2,764 area, now seems to offer some resistance, above which the Gold price could aim to challenge the all-time peak, around the $2,790 region touched in October. This is closely followed by the $2,800 mark, which if conquered will be seen as a fresh trigger for bullish trades and set the stage for an extension of the recent well-established uptrend witnessed over the past month or so.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD accelerates losses to 1.0930 on stronger Dollar
The US Dollar's recovery regains extra impulse sending the US Dollar Index to fresh highs and relegating EUR/USD to navigate the area of daily troughs around 1.0930 in the latter part of Friday's session.
GBP/USD plummets to four-week lows near 1.2850
The US Dollar's rebound keep gathering steam and now sends GBP/USD to the area of multi-week lows in the 1.2850 region amid the broad-based pullback in the risk-associated universe.
Gold trades on the back foot, flirts with $3,000
Gold prices are accelerating their daily decline, steadily approaching the critical $3,000 per troy ounce mark as the Greenback's rebound gains extra momentum and US yields tighten their retracement.
Can Maker break $1,450 hurdle as whales launch buying spree?
Maker holds steadily above $1,250 support as a whale scoops $1.21 million worth of MKR. Addresses with a 100k to 1 million MKR balance now account for 24.27% of Maker’s total supply. Maker battles a bear flag pattern as bulls gather for an epic weekend move.
Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.