Gold finds support in calm start to the week
- Gold snaps back above $2,900 after a downbeat performance on Friday.
- Plenty of geopolitical news filled again over the weekend.
- A daily close above $2,900 would support more upside in Gold this week.
Gold’s price (XAU/USD) ticks up and recovers above $2,900 at the time of writing on Monday after its steep correction on Friday. While United States (US) markets are closed due to the President’s Day bank holiday, the Federal Reserve (Fed) is not. On a rather windstill trading day, no less than three Fed speakers will issue comments in an otherwise empty macroeconomic calendar.
Meanwhile, the weekend was filled again with several geopolitical news and comments. US President Donald Trump and Russian President Vladimir Putin are set to meet each other in Saudi Arabia to discuss peace within Ukraine. Neither Ukraine nor Europe are invited to these talks, while both US and Russian officials are already underway.
Daily digest market movers: Geopolitics take over
- Market participants are waiting for more insights on President Trump’s reciprocal tariff plans, which could heighten global trade tensions. Next to that, levies on automobiles would be coming as soon as April 2, Bloomberg reports.
- If Senator Cynthia Lummis’ proposal becomes more concrete, Bitcoin could join Gold. The senator suggested adding Bitcoin to the US reserves on Sunday, highlighting the blockchain network's transparency and accessibility.
- At 14:30 GMT, Federal Reserve Bank of Philadelphia Patrick Harker delivers a speech on the economic outlook at the Central Banking Series Conference at the University of the Bahamas in Nassau.
- At 15:20 GMT, Fed Governor Michelle W. Bowman delivers brief remarks on the economy and bank regulation at the American Bankers Association (ABA) Conference for Community Bankers in Phoenix, Arizona.
- Closing off this Monday, at 23:00 GMT, Fed Governor Christopher J. Waller speaks on the economic outlook at the UNSW Macroeconomic Workshop in Sydney, Australia.
Technical Analysis: Watch out for calm days
Gold recovers and trades back above $2,900 on Monday following the near 1.5% decline on Friday. However, keep in mind that US bond markets are closed on Monday due to the President’s Day bank holiday. Look out for the headlines on Ukraine and possible new announcements on tariffs.
The first support level on Monday, the S1 support, stands at $2,859. Further down, the S2 support at $2,836 should act as a safeguard and prevent any additional declines to the more significant $2,790 level (October 31, 2024, high).
On the upside, the Daily Pivot at $2,899 is the first level to reclaim again. Next, the R1 resistance at $2,922 is the first level that needs to be recovered, followed by the R2 resistance at $2,962. Further up, the $3,000 psychological level could be next.
XAU/USD: Daily Chart
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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