Gold prices have recently tanked to multi-week lows, trading just above $3,220, the lowest price since mid-April. This decrease reflects a much greater trend in the financial markets. Investors are feeling jittery, looking for the most important economic indicators that will affect their future trading decisions.
On Thursday, gold’s value tanked in a historic way. This drop was fueled by a generally positive risk tone as optimism lifted for de-escalating trade tensions between the US and China. Investors’ bullish sentiment has reduced demand for safe-haven assets such as gold. They’re using their track record as looking good on paper to now venture into riskier investments.
And just as gold finds it harder to find its legs, the currency market is starting to look like it has an identity crisis. The EUR/USD currency pair has managed to remain above the 1.1300 psychological level. Nevertheless, during the day it did fall a bit, about 0.5 percent on the day. The Euro has fallen a bit against the U.S. dollar. This change is a sign of the caution that has overtaken traders as they weigh the recent economic data to come.
At the same time, the GBP/USD has been put on the back foot, dropping back under the 1.3300 level. British pound continues to have a hard time keeping any upward momentum given continued policy economic and the risk of a possible market crash. Experts similarly warned that the pound’s future performance will continue to depend largely on wider economic conditions and geopolitical events.
Market participants are especially keen to see the upcoming ISM Manufacturing PMI report for the month of April. This important economic indicator will give the public further insight into the health of the nation’s manufacturing sector. A solid manufacturing report will likely move trading trends in other assets such as gold and currencies.
This is a great example of the interplay between risk sentiment and asset performance. Reports suggesting a thaw in U.S. trade relations are fueling optimism in the market. In turn, commodity traders will be tempted to choose equities and other risk-asset alternatives over traditional safe havens such as gold. Combined with the seasonal norm, this shift creates overwhelming downward pressure on XAU/USD prices.