- Gold trades around $2,900 on Thursday as tariff tensions start to ease a bit.
- The delay for automaker US tariffs on Mexico and Canada has led to a shift in Treasury yields.
- Traders are betting on multiple Fed rate cuts while US economic data is deteriorating.
Gold’s price (XAU/USD) is softening a touch to around $2,900 on Thursday, though a new all-time high above $2,956 could still be in the cards. Although there might be some easing for Canada and Mexico with a delay on car import tariffs into the United States (US), the reciprocal tariffs are still due to kick in as of April. This still supports safe haven inflow which is beneficial for the precious metal.
Meanwhile, the focus shifts this Thursday to Europe, where the European Central Bank (ECB) will deliver its interest rate decision, with market expectations for a 25 basis points (bps) rate cut. A high-stakes European meeting is set to take place as well, where EU leaders will decide on the defense spending package and the possibility of providing more aid to Ukraine.
Another seismic shift can be seen this week in bonds, where traders are now pricing in multiple interest rate cuts by the Federal Reserve (Fed) for 2025. The reason is the deteriorating US economic data, which looks to confirm the idea that exceptionalism has come to an end and sparks recession fears.
Daily digest market movers: Delay bearish
- The delay of automaker US tariffs on Mexico and Canada has led to a shift in Treasury yields, with investors expecting the Fed to cut interest rates multiple times this year, which could benefit Gold, Bloomberg reports.
- Another precious metal, Copper, jumped by more than 5% in Wednesday’s New York session. Prices are leaping further above other global benchmarks, as US President Donald Trump suggested imports of this commodity could be subject to a 25% tariff, Reuters reports.
- Mali has stopped issuing permits for small-scale Gold mining to foreign nationals after several deadly incidents. Interim President Assimi Goita has “instructed the government to strengthen measures to avoid human and environmental tragedies,” Minister of Security and Civil Protection General Daoud Aly Mohamedinne said on Wednesday, Bloomberg reports.
Technical Analysis: Taking a breather
More bets on interest rate cuts by the Federal Reserve are another tailwind for Gold while markets undergo seismic shifts. When all analysts and economists were predicting just one or no rate cut from the Fed, in just three trading days that narrative has now shifted to possibly more than at least two rate cuts this year.
While Gold trades near $2,905 at the time of writing, the daily Pivot Point at $2,914 and the daily R1 resistance at $2,934 are the key levels to watch for on Thursday. In case Gold sees more inflows, the daily R2 resistance at $2,950 will possibly be the final cap ahead of the all-time high of $2,956 reached on February 24.
On the downside, the S1 support at $2,899 acts as a double support with the $2,900 psychological big figure. That will be the vital support for this Thursday. If Bullion bulls want to avoid another leg lower, that level must hold. Further down, the daily S2 support at $2,879 should be able to catch any additional downside pressure.
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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