Gold Price Forecast: XAU/USD attracts some sellers below $3,250 on firmer US Dollar
- Gold price tumbles to around $3,245 in Thursday's early Asian session, down 1.25% on the day.
- De-escalation in trade tensions and a firmer US Dollar weigh on the Gold price.
- US April employment report on Friday will be closely monitored.
The Gold price (XAU/USD) extends the decline to around $3,245 during the early Asian session on Thursday. The precious metal edges lower to near a two-week low amid easing US-China trade tensions and stronger US Dollar (USD) demand.
Risk sentiment is improving after US President Donald Trump on Tuesday signed an executive order aimed at easing tariffs on foreign auto parts, granting carmakers a two-year window to raise domestic sourcing. Additionally, US Treasury Secretary Scott Bessent emphasized “very good” offers from trade partners.
US trade representative Jamieson Greer said late Wednesday that US President Donald Trump’s administration expects to conclude initial tariff deals with some US trading partners within weeks. Optimism surrounding tariffs lifts the Greenback and weakens demand for traditional safe-haven assets like Gold as it makes yellow metal more expensive for holders of other currencies.
On the other hand, rate cut hopes from the US Federal Reserve (Fed) after weaker-than-expected US economic data might help limit the yellow metal’s losses. The US economy contracted at an annualised rate of 0.3% in the first quarter (Q1) of 2025, according to the US Commerce Department on Thursday. This figure came in weaker than the estimation of 0.4% and down from the previous reading of a 2.4% expansion.
Futures contracts see the Fed starting rate cuts in June, with a total of four quarter-point reductions expected, lowering the rate to the 3.25%-3.50% band by year-end. Investors will closely watch the US April employment data due on Friday for fresh impetus. The NFP is expected to show 130K job additions in April, while the Unemployment Rate is estimated to remain at 4.2%.
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.