Gold on its way to fresh all-time high while traders mull upcoming ECB and US GDP
- Gold is gaining in the European trading session on Thursday, ahead of the ECB meeting and US GDP release.
- Tensions are brewing between Fed Chairman Powell and US President Trump after Wednesday's Fed meeting.
- Gold's price is making its way to a new all-time high, which could take place any moment.
Gold’s price (XAU/USD) is print fresh weekly highs by the hour and is really close to a new all-time high which, for now, still stands at $2,790.11. Bullion was unable to make that happen on Wednesday, after a rather hawkish Federal Reserve (Fed) decision on interest rates delivered some headwinds. The main element that drew all the attention was Fed Chairman Jerome Powell’s reaction to questions about United States (US) President Donald Trump and his persistent call for substantially lower rates and borrowing costs.
A clash is coming, that looks to be certain, between the White House and the Federal Reserve. Fed Chairman Powell persistently refused to deliver any comments on questions from journalists around President Trump. The hawkish tilt from the Fed is a message to President Trump that the Fed remains independent and needs to see a clear and unambiguous weakening in the data to prompt further action.
Daily digest market movers: Hoarding precious metals
- Markets perceived the Fed rate decision as rather hawkish as the Fed does not seem to be in a hurry to lower US interest rates, Bloomberg reports.
- A surge in Gold shipments to the US has led to a shortage of bullion in London, as traders amass a $82bn stockpile in New York due to fears of Trump administration tariffs, the Financial Times reports.
- The Gold Bar Integrity Database, developed by the London Bullion Market Association, has been launched. The database will trace the precious metal to prevent supply from criminal gangs or conflict zones ending up in bank vaults and stop counterfeit bars stamped with the logos of major refineries from entering the market, Bloomberg reports.
- The US Gross Domestic Product (GDP) data for the fourth quarter of 2024 will be released at 13:30 GMT.
Technical Analysis: Watch out for the sprint
Although the Fed’s interest rate decision on Wednesday was rather hawkish, that does not mean that Gold is barred from moving higher. In the US GDP report scheduled later this Thursday, the Personal Consumption Expenditures (PCE) component could trigger another leg up in Gold’s price, certainly if the number comes in softer than expected. That would mean a slowdown in the inflation metrics, which could quickly bring Gold up to the all-time high of $2,790.
The first line of support comes in at $2,721, a sort of double top in November and December broken on January 21. Just below that, $2,709 (October 23, 2024, low) is in focus as a second nearby support. In case both abovementioned levels snap, look for a dive back to $2,680 with a full-swing sell-off.
Conversely, that all-time high of $2,790 is very near now, less than 1% away from current levels. Once above that, a fresh all-time high will present itself. Meanwhile, some analysts and strategists have penciled in calls for $3,000, but $2,800 looks to be a good starting point as the next resistance on the upside.
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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