Gold prices delivered some noteworthy pain on Friday, almost making up all of Thursday’s good news. The yellow metal has an extensive legacy as a store of value and medium of exchange. That seems likely to close the week in the red, highlighting the risk and volatility in the market. Even as traders continue to trade on mixed signals around US-China trade talks, the gold market is feeling significant pressure.
Today’s Pivot Point for gold lies at $3,335, and represents a key intraday support and resistance zone. In order for gold prices to get back on track, they need to recapture this line in the sand. Resistance levels stand out. As shown in the daily chart below, early Friday, gold price made an initial visit to test the R1 intraday resistance just above $3,381. Inspite of these headwinds, there are multiple ways gold can continue its run. It continues to be on course for the R2 resistance level of $3,414 and overcoming the key $3,400 resistance mark.
Central Banks Boost Gold Reserves
Last year, central banks made headlines by bringing home a record 1,136 tonnes of gold. This historic influx was pegged at approximately $70 billion. This is the most annual purchase of gold since recording keeping started. It does quite clearly mark a major shift in investment strategy by central banks around the world.
Emerging economies like China, India, and Turkey have led the pack in being quite aggressive when it comes to boosting their gold reserves. This inexorable trend goes hand in hand with the increasing acknowledgment that gold plays an irreplaceable role as a hedge against economic unpredictability and turmoil. As global markets continue to face challenges, central banks’ appetite for gold suggests a strategic pivot that could influence future prices.
Gold holds strong as an important asset during economic turmoil. Its historical status as a safe haven earns it the trust of investors who flock to the asset to avoid the erosion of their wealth. Meanwhile, central banks are increasing their holdings. Market analysts are certain to be watching these trends closely for their potential impact on gold pricing in the months ahead.
Trade Tensions Impact Market Sentiment
Now, the trade war between the U.S. and China has added another level of complexity to the environment gold prices are operating in. Recent developments revealed that China is considering exempting certain US goods from tariffs due to rising costs, signaling a potential thaw in relations. Uncertainty still remains about where trade negotiations stand.
US President Donald Trump has claimed that backdoor negotiations are taking place, though Chinese officials have rejected the claims of any talks. That disconnect has left many traders guessing as to what the ultimate terms of any trade deal will look like — and when it will happen. The contradictory signals sent by both countries are adding to the uncertainty experienced by the market, causing traders to pull back from the market and impacting investment decisions.
Traders certainly seem to be reacting to market speculation that a trade deal is at hand. This sentiment could lead to extreme price volatility in gold. Investors are considering the possible effects of both a trade deal and an intensification of hostilities between the world’s two largest economies.
Market Outlook and Future Trends
Looking to the future, most analysts are bullish on gold, if not outright bearish on today’s gold market. One factor that may indeed be driving up gold prices is central banks increasing their own reserves. Continued advancements in trade negotiations could provide medium-term headwinds for gold.
Market participants will be looking at the key levels closely. If gold can reclaim the daily Pivot Point at $3,335 and break through resistance levels, it could signal a bullish trend. Continued trade stressors could prevent a further recovery of prices.