The current risk-on mood is positively impacting the XAU/USD, with Gold prices showing resilience in the face of global economic uncertainties. This comes as the market anticipates details from US President Donald Trump's tariff plans and observes easing geopolitical tensions. Investors are keenly awaiting Trump's upcoming speech at the World Economic Forum, hoping for more concrete announcements on tariffs which could significantly influence market dynamics.
The US Dollar remains steady, maintaining its position above recent lows, bolstered by a modest rebound in US Treasury bond yields. Meanwhile, analysts note that Gold prices might edge towards the $2,665-2,662 range, potentially dipping to the 2,627-2,622 confluence. The precious metal's inverse relationship with the US Dollar and US Treasuries continues to play a pivotal role in its valuation dynamics.
Central banks have notably contributed to Gold's market stability, adding approximately 1,136 tonnes of Gold valued at around $70 billion to their reserves in 2022, according to the World Gold Council. Gold's status as a safe-haven asset is further reinforced by concerns regarding Trump's tariff initiatives, which provide additional support to the precious metal.
The strength of the US Dollar traditionally suppresses Gold prices, whereas a weaker Dollar tends to elevate them. Current market sentiment suggests that bets on further interest rate cuts by the Federal Reserve may deter USD bulls from making fresh investments. The anticipated release of US Weekly Jobless Claims data also holds potential to influence the XAU/USD trend.
Trump's proposed economic policies are broadly perceived as inflationary, potentially prompting the Federal Reserve to maintain a hawkish stance and keep interest rates elevated for an extended period. However, the Dollar appears poised for recovery, building on an overnight bounce from its monthly low amid rising US Treasury bond yields.
Despite this, investors remain focused on the possibility that the US central bank will enact at least two rate cuts by year-end. Central banks' substantial Gold holdings underscore their confidence in the metal's enduring value amidst fluctuating economic landscapes.
The Federal Reserve and European Central Bank are scheduled to announce rate decisions next Wednesday and Thursday, respectively. These announcements are expected to inject volatility into the market, providing further impetus to the non-yielding yellow metal.