- Gold price edges lower in Friday’s Asian session, pressured by profit-taking.
- Mounting uncertainty about tariffs and recession fears could boost the safe-haven flows, supporting the Gold price.
- Fed’s Daly is set to speak later on Friday.
The Gold price (XAU/USD) holds steady on Friday after retreating from an all-time high of $3,358 as investors book profits during a long Easter weekend. Significant uncertainty over US President Donald Trump’s tariffs on imports into the US and ongoing geopolitical tensions could underpin the Gold price, which is known as a safe haven asset.
On the other hand, the Federal Reserve (Fed) Chair Jerome Powell turned hawkish, reducing the likelihood of a Fed rate reduction in June. This, in turn, could lift the Greenback and weigh on the USD-denominated commodity price. Powell said that a weak economy and high inflation could conflict with the Fed’s goals and make a stagflationary scenario possible. The Federal Reserve’s (Fed) Mary Daly is scheduled to speak later on Friday. Trading volume is likely to be lightened on Good Friday.
Gold price drifts lower on Good Friday
- “Gold remains heavily supported by a broadly weaker dollar, uncertainty around tariff announcements and fears about a global recession,” said Lukman Otunuga, senior research analyst at online trading broker FXTM.
- The US Initial Jobless Claims for the week ending April 12 dropped to 215K, according to the US Department of Labor (DOL) on Thursday. This figure came in below initial estimates and was lower than the previous week of 224K (revised from 223K).
- Continuing Jobless Claims for the week ending April 5 went up by 41K to 1.885M versus 1.844M prior (revised from 1.85M).
- The US Building Permits rose 1.6% to 1.482 million in March, exceeding the 1.45 million estimates. Meanwhile, Housing Starts declined to 1.324M in March from 1.494M in February (revised from 1.501M).
- Money market traders have priced in nearly 86 bps of Fed rate cuts by the end of 2025, with the first cut expected in July, according to the CME FedWatch tool.
Gold price bullish bias lingers, overbought RSI warrants caution for bulls
Gold price trades on a flat note on the day. The precious metal keeps the bullish vibe on the daily timeframe, characterized by the price holding above the key 100-day Exponential Moving Average. Nonetheless, the 14-day Relative Strength Index (RSI) moves above the 70.00 mark, indicating overbought conditions and warranting some caution. This suggests that further consolidation or a temporary sell-off is on the cards.
On the bright side, the immediate resistance level to watch is $3,355, the upper boundary of the Bollinger Band. Sustained trading above the mentioned level could pave the way to the $3,400 psychological level.
In the bearish case, the low of April 18 at $3,230 acts as an initial support level for XAU/USD. Further south, the next contention level is seen at $3,105, the low of April 2.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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