- Gold ties up with a winning streak and books a second day of gains.
- Copper tariffs are the latest on the tariff headlines from US President Trump.
- Gold could head back to the all-time high level at $3,057 at a slow pace.
Gold’s price (XAU/USD) is edging higher to around $3,027 at the time of writing on Wednesday and is turning this week’s performance into green numbers. The precious metal is being bought together with other precious metals as Copper pops to a new all-time high. Copper metal is in the eye of attention after United States (US) President Donald Trump mentioned on Tuesday that Copper tariffs will be implemented in the coming weeks, which is far sooner than markets were anticipating.
Meanwhile, there is also a headline risk on Ukraine, where a Black Sea ceasefire deal is on the table. Ukraine’s President Volodymyr Zelenskiy was quick to support the breakthrough and said his country was ready to adhere to it effective immediately. The Kremlin was quick to issue additional demands that would need to be met before the ceasefire deal in the Black Sea could become valid, with the request to see sanctions on banks and companies involved in agricultural exports being halted, Bloomberg reports.
Daily digest market movers: Fed projections hardly moving
- The primary sticking point in talks for an acquisition of Australian miner Gold Road Resources by South Africa's Gold Fields was the price, according to the Australian company's chief executive. In an interview on Wednesday, Gold Road Resources CEO Duncan Gibbs said the company remains open to further talks with Gold Fields but noted that most of its shareholders do not support a takeover at the price its partner proposed, Dow Jones reports.
- Another reason mentioned for Gold being bought this Wednesday is because the US Conference Board Consumer Confidence dropped to the lowest level in four years in March on concerns over escalating trade wars and higher prices, Bloomberg reports.
- The CME Fedwatch Tool sees the Federal Reserve’s (Fed) policy rate unchanged in its May meeting by 87.1%. Chances for a rate cut in June are currently at 63.2%.
Technical Analysis: No breakout yet
Gold sees how the surge in Copper prices pulls up the whole precious metals complex higher. This is a good set off from the easing of the reciprocal tariffs fears seen on Monday. Expect a test of this week’s high, near $3,036, before the all-time high at $3,057 comes into play.
On the upside, the daily R1 resistance comes in at $3,034 and coincides with this week’s high for now. Further up, the R2 resistance at $3,049 roughly coincides with Friday’s high. This means this level is a heavy barrier before pointing to the current all-time high of $3,057.
On the downside, the intraday S1 support stands at $3,006, preceding the $3,000 mark, which can be perceived as a bullish sign. That means the $3,000 mark is no longer exposed and has some circuit breaking element beforehand to slow down any downmoves. Further down, the S2 support comes in at $2,992.
XAU/USD: Daily Chart
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.
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