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Gold rises after disappointing U.S. economic reports
The gold (XAU) price rose by 0.25% on Tuesday as the U.S. dollar (USD) weakened. Greenback declined after disappointing consumer confidence and home sales data, while uncertainty around U.S. President Donald Trump's planned tariffs kept traders cautious.
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Possible effects for traders
Although Trump said that the administration won't impose all of the announced taxes on 2 April and that some countries might get breaks, gold investors preferred to maintain their long positions. 'Investors are concerned about the state of the world, especially with U.S. policies being what they are, and so they're buying gold as an alternative asset because they're concerned that the U.S. government may throw the world into a global recession', said Jeffrey Christian, managing partner of CPM Group. Indeed, the U.S. Consumer Confidence report indicated a decline in sentiment for four months, with households being the most pessimistic about the future in 12 years. 'Households were expecting President Trump to lead with tax cuts and deregulation, but instead, we have austerity and the prospect of significant trade tariffs. This is prompting anxiety about household finances and job prospects, with the concern being this translates into weaker spending', said James Knightley, chief international economist.
Depressing mood among consumers might prompt the Federal Reserve (Fed) to speed up rate cuts, which may benefit gold. At the same time, Raphael Bostic, Atlanta Fed President, said he expected just one 25-percentage-point rate cut by the year-end, as inflation remains elevated. Overall, a strong bullish trend in XAUUSD remains intact amid geopolitical and economic uncertainties. 'The odds of rate cuts seem to be backing off a little bit, and I think overall, it's still really bullish for an inflationary metal like gold... I would say the next level up is probably around $3,125', said Daniel Pavilonis, senior market strategist at RJO Futures.
XAUUSD fell during the Asian and early European trading sessions but remained above the 10-day moving average. Today's macroeconomic calendar is rather uneventful, but traders should monitor any new developments around trade tariffs. The U.S. Durable Goods report at 12:30 p.m. UTC may move XAUUSD. However, its impact will likely be limited as it's considered a lagging indicator. Additionally, two Fed officials will give speeches, adding volatility to all USD pairs. Key levels to watch for XAUUSD are support at $3,000 and resistance at $3,020.
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