Gold prices experienced a downward shift on Tuesday, falling from Monday's record high of $2,956. This decline was influenced by a variety of factors, including a strong U.S. Dollar and heightened geopolitical tensions. The Trump administration's decision to expand its semiconductor restrictions on China added to market volatility. As central banks continue to diversify their reserves by purchasing Gold, the precious metal's price remains under pressure, with significant selling activity apparent.
The S1 support for Gold stands at $2,930, while the daily Pivot Point is near $2,943. Despite these technical indicators, buying efforts in early Asian trading were insufficient to push Gold back above the Pivot Point. The market rout continues to weigh heavily on Gold, causing it to hover around the S1 support level.
The strong U.S. Dollar has played a crucial role in controlling Gold prices. A robust Dollar typically suppresses the price of Gold by making it more expensive for foreign investors. Meanwhile, the EUR/USD currency pair traded tightly below 1.0500 on Tuesday, further indicating the Dollar's strength.
Adding to the economic landscape, Richmond Fed President Tom Barkin is scheduled to deliver a speech on "Inflation Then and Now" at 18:00 GMT. This will be followed by a discussion from Lorie Logan, President of the Federal Reserve Bank of Dallas, on the future of the central bank balance sheet at 21:15 GMT. These speeches are anticipated to provide additional insights into the Federal Reserve's monetary policy direction.
Market participants are closely monitoring the CME FedWatch tool, which indicates an increased likelihood of an interest rate cut by the Federal Reserve in June. This potential shift in policy could have significant implications for both the Dollar and Gold prices.
The economic data from the European Central Bank (ECB) revealed that Negotiated Wage Rates rose at a slower pace in Q4 compared to Q3. This development may influence ECB's monetary policy decisions moving forward.
Central banks are actively diversifying their reserves by increasing their Gold holdings. Countries like China, India, and Turkey are rapidly expanding their Gold reserves as part of efforts to bolster economic and currency strength. The demand for Gold from these emerging economies underscores its role as a safe-haven asset amid global uncertainties.
The Trump administration's move to impose stricter semiconductor curbs on China adds another layer of complexity to the geopolitical landscape. By targeting China's technological advancements, these measures are expected to escalate tensions between the two economic powerhouses.