Gold is pulling back toward $4,300 early Tuesday, after having faced rejection once again near the $4,380 region. The focus remains on the US-China trade talks amid broader market uncertainty.
Gold remains the go-to safe haven
Nothing seems to have changed for Gold from a fundamental standpoint.
However, markets have turned hopeful that the United States (US) and China could reach a trade deal as high-level talks resume this week.
US Treasury Secretary Scott Bessent said on Friday he expects to meet this week with Chinese Vice Premier He Lifeng in Malaysia to de-escalate the renewed trade tensions.
Easing US-China trade concerns revive the US Dollar (USD) recovery, capping the Gold price upside.
White House Economic Adviser Kevin Hassett said on Monday the government shutdown could likely end this week, boosting risk sentiment further and acting as a headwind to Gold’s record-setting rally.
That said, Gold remains a go-to safe haven asset and a ‘buy-on-pullbacks’ trade as investors face uncertainty ahead of the critical US Consumer Price Index (CPI) release on Friday and key earnings reports from big US companies.
Meanwhile, growing bets of two Federal Reserve (Fed) interest rate cuts keep bargain-hunting demand for the bright metal intact.
Furthermore, markets digest the latest tariff tantrum by US President Donald Trump as he threatened late Monday to impose 155% tariffs on China from November 1 unless they make a deal.
All in all, Gold traders will continue to monitor US-China trade updates and broader market sentiment for fresh directives.
Gold price technical analysis: Daily chart
As Gold has been recording all-time highs each day for a week, the immediate hurdle is seen at the $4,380 supply zone, above which the $4,400 must be conquered.
The next resistance is seen at the $4,450 psychological level, followed by the $4,500 mark.
The 14-day Relative Strength Index (RSI) is easing further from the extreme overbought zone, currently near 78.50, suggesting that buyers could be prepping up for a fresh leg higher on pullbacks.
To the downside, the rising channel resistance-turned-support at $4,285 could limit the correction.
A sustained move below that level could open further declines toward the actual channel support at $4,136.
The natural tendency of the rising channel formation is a break to the downside and hence, a daily candlestick close below the latter could confirm a bearish breakdown, initiating a fresh downtrend toward the $4,001, where the 21-day Simple Moving Average (SMA) aligns.
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.
