Gold trims part of its modest intraday gains, albeit it retains a positive bias and trades above the $4,800 in the second half of the day on Thursday. Despite hopes for Iran diplomacy, the instability in the Strait of Hormuz offers some support to the safe-haven US Dollar, which turns out to be a key factor acting as a headwind for the commodity.
Dow Jones futures rise on prospects of renewed US-Iran negotiations
Dow Jones futures advance 0.11% to near 48,720 during European hours on Thursday, ahead of the regular opening in the United States (US). Meanwhile, S&P 500 and Nasdaq 100 futures also rise 0.20% and 0.44% to near 7,070 and 26,480, respectively, at the time of writing.
US stock futures moved slightly higher after a record-setting session for the S&P 500 and Nasdaq 100, amid rising optimism, supported by expectations of a potential de-escalation in the Middle East conflict.
US President Donald Trump stated that the war was “close to over.” A Bloomberg report highlighted speculation about a possible two-week extension of a ceasefire, although Trump downplayed the need for such a measure, pointing to ongoing negotiations aimed at ending the conflict.
The Strait of Hormuz remains effectively closed under a dual blockade. However, Tehran may allow vessels to pass freely through the Omani side of the Strait if an agreement is reached to avoid a renewed escalation in hostilities.
During Wednesday’s regular US trading session, the S&P 500 rose by 0.8%, while the Nasdaq 100 surged 1.59%, marking its strongest 11-day rally on record, driven largely by gains in technology stocks. Meanwhile, the Dow Jones edged down by 0.15%.
Advances were led by the technology, consumer discretionary, and communication services sectors, whereas materials, industrials, and utilities lagged. Looking ahead, traders are focusing on a fresh round of corporate earnings due Thursday, including results from Netflix and PepsiCo.
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
NZD/USD remains stronger above 0.5900 as China’s economy expands in Q1
NZD/USD remains stronger for the fourth consecutive day, trading around 0.5920 during the Asian hours on Thursday. The pair remains stronger following China’s first-quarter Gross Domestic Product figures. China’s economic change could impact the NZD as a key trading partner for New Zealand.
China’s economy expanded 1.3% quarter-over-quarter (QoQ) in the first quarter (Q1) of 2026, compared to a 1.2% growth in Q4 of 2025, coming in line with the market consensus. On an annual basis, the Chinese Gross Domestic Product (GDP) rate rose 5.0% in Q1 after advancing 4.5% in the previous quarter, stronger than the market expectation of 4.8% print.
China’s annual March Retail Sales increased by 1.7% versus 2.3% expected and 2.8% prior, while Industrial Production came in at 5.7% versus 5.5% estimate and February’s reading of 6.3%.
The NZD/USD pair appreciates as the US Dollar (USD) continues to lose ground on improved market sentiment, driven by expectations of a potential de-escalation in the Middle East conflict.
US President Donald Trump stated that the war was “close to over.” A Bloomberg report indicated speculation about a possible two-week extension of a ceasefire, although Trump dismissed the necessity of such a move, citing ongoing negotiations aimed at ending the conflict.
The Greenback faced additional pressure from easing energy prices, which helped ease inflation concerns and tempered expectations of further central bank tightening. The Federal Reserve (Fed) is widely anticipated to hold interest rates steady this month and possibly for the rest of the year.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
Australia unemployment rate seen at 4.3% in March, job creation to slow
Australia will publish the monthly employment report for March on Thursday at 01:30 GMT, and market participants expect a modest increase in job creation. The Australian Bureau of Statistics (ABS) is expected to announce that the country added 20K new jobs in the month, while the Unemployment Rate is forecast at 4.3%, unchanged from February. The Participation Rate, in the meantime, stood at 66.9% in the previous month.
The ABS reports both full-time and part-time positions through the monthly Employment Change. Generally speaking, full-time jobs entail working 38 hours or more per week, usually include additional benefits, and typically provide a consistent income. On the other hand, part-time employment generally means higher hourly rates but lacks consistency and benefits. That’s why the economy prefers full-time jobs. In February, Australia gained 79.4K part-time positions and lost 30.5K full-time ones.
Australian unemployment rate steady in March
Australia’s employment figures may be overshadowed by ongoing optimism. The Australian Dollar (AUD) is firmly up against the battered US Dollar (USD) as investors assess the developments of the Iran war. An extension of the ceasefire between the United States (US) and Iran is on the table, boosting the market’s mood despite the double blockage of the Strait of Hormuz.
The ongoing crisis in the Middle East dominates financial markets, as the interruption of crude oil and gas supply has boosted inflationary pressures globally. Central banks are shifting towards a more hawkish monetary policy approach, although that’s not the case for the Reserve Bank of Australia (RBA) which turned hawkish ahead of the war, amid domestic capacity pressures keeping inflation above target and strength in the labor market, according to the statement accompanying the March monetary policy decision. The Iran war was just another factor that lean the scale towards a tighter monetary policy.
As a result, the RBA hiked interest rates, increasing the Official Cash Rate (OCR) by 25 basis points to 4.1%, as policymakers noted that, “while inflation has fallen substantially since its peak in 2022, it picked up materially in the second half of 2025.” It was quite a split decision, with policymakers voting 5:4 in favor of a hike.
The anticipated employment figures are not really outstanding, and 20K new jobs are hardly enough to prompt by themself a RBA reaction, but coupled with domestic inflationary pressures and the extension of the Iran figure, will pretty much confirm more interest rate hikes are coming this year.
Stronger-than-anticipated job creation, coupled with a decreasing Unemployment Rate, should reinforce rate hike expectations and hence, push the Aussie up against most major rivals. A dismal employment report, on the other hand, could help diminish concerns about the labor market’s strength, but it won’t be sufficient to consider a shift in the current hawkish monetary policy. Near term, it could weigh on the AUD, but as long as risk-on backs USD weakness, the pair is likely to resume its advance once market players digest the news and turn back their eyes to the Middle East.
When will the Australian employment report be released and how could it affect AUD/USD?
The ABS March employment report will be released early on Thursday. As previously noted, the Australian economy is expected to have added 20K new jobs in the month, while the Unemployment Rate is forecast at 4.3%. Market participants will also be attentive to the breakdown of full-time and part-time positions.
Valeria Bednarik, Chief Analyst at FXStreet, notes: “The AUD/USD pair trades well above the 0.7100 mark and a handful of pips below the 2026 peak at 0.7187 ahead of the employment report release. The technical picture is bullish and there’s a good chance that upbeat data hinting at additional rate hikes would push the pair beyond the mentioned top. The pair could initially run towards the 0.7230 region, while additional gains will find the next resistance at 0.7270.”
Bednarik adds: “As long as markets remain optimistic about the Iran war, the Greenback is set to remain on the back foot, which means the bearish scope for AUD/USD is limited. Employment figures need to be really discouraging to trigger a decline, which, anyway, should be short-lived. The immediate downward barrier is the 0.7100 threshold, followed by the 0.7060 price zone. Further declines seem unlikely within the release, although sudden USD demand can push the pair down to 0.7000.”
Economic Indicator
Employment Change s.a.
The Employment Change released by the Australian Bureau of Statistics is a measure of the change in the number of employed people in Australia. The statistic is adjusted to remove the influence of seasonal trends. Generally speaking, a rise in Employment Change has positive implications for consumer spending, stimulates economic growth, and is bullish for the Australian Dollar (AUD). A low reading, on the other hand, is seen as bearish.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
USD/JPY steady below 160.00 amid Japan intervention risks
USD/JPY holds firm on Wednesday despite a broadly weaker US Dollar (USD). The pair remains confined within a one-month trading range, as elevated Oil prices linked to tensions in the Middle East continue to weigh on the Japanese Yen (JPY). However, intervention risk near the 160.00 handle is keeping a lid on further upside.
At the time of writing, USD/JPY is trading around 159.10, up nearly 0.20% on the day, snapping a two-day losing streak.
Japan’s Finance Minister Katayama reiterated on Wednesday, “We will take bold actions on FX as needed,” after meeting US Treasury Secretary Scott Bessent. The Japanese Yen strengthened briefly following the remarks but quickly gave back gains, as geopolitical developments continue to dominate market sentiment.
On the geopolitical front, investors remain cautiously optimistic that tensions between the United States and Iran could de-escalate, with both sides signaling a willingness to resume talks. Reports suggest a possible second round of negotiations could take place later this week, supporting risk sentiment. This has weighed on the US Dollar and pushed Oil prices lower from recent highs.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is hovering near 98.10, close to a six-week low touched on Tuesday.
Still, risks remain skewed to the upside, with the Pentagon reportedly considering deploying additional troops to the region to increase pressure on Iran.
At the same time, ongoing tensions around the Strait of Hormuz are limiting a deeper pullback in Crude prices, keeping inflation concerns in focus. While the recent dip in Oil has eased pressure on central banks to tighten monetary policy, particularly the Federal Reserve (Fed), it has also revived expectations that the US central bank could still consider rate cuts later this year.
In contrast, elevated Oil prices continue to complicate the Bank of Japan’s (BoJ) policy outlook. While they may keep the BoJ on a gradual tightening path, higher energy costs could weigh on Japan’s growth outlook, potentially slowing the pace of policy normalization.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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Gold stays under bearish pressure and trades near $4,800 after having touched its highest level in a week above $4,870 earlier in the day. Given that the path to a durable US-Iran agreement remains uncertain on the back of the instability in the Strait of Hormuz, the US Dollar stages a modest recovery from its lowest level since early March and undermines the commodity.
Gold retreats further from four-week top amid modest USD recovery; downside seems limited
Gold (XAU/USD) extends its intraday retracement slide from a nearly four-week high, touched during the Asian session earlier this Wednesday, and touches a fresh daily low, around the $4,815 region in the last hour. Given that the path to a durable US-Iran agreement remains uncertain on the back of the instability in the Strait of Hormuz, the US Dollar (USD) stages a modest recovery from its lowest level since early March and undermines the commodity. In fact, Iran’s ambassador to the UN described the US blockade, which took effect on Monday, as a grave violation of Tehran’s sovereignty.
Moreover, Iran’s Islamic Revolutionary Guard Corps (IRGC) has vowed to retaliate, keeping geopolitical risks in play. This, in turn, benefits the USD’s reserve currency status and exerts some downward pressure on the Gold price. Investors, however, remain hopeful that the door for Iran diplomacy remains open. Furthermore, diminishing odds for a rate hike by the US Federal Reserve (Fed) should keep a lid on any meaningful USD recovery. This, in turn, could offer some support to the non-yielding yellow metal and help limit deeper losses, warranting some caution for aggressive bearish traders.
US Vice President JD Vance, speaking at a public event, again struck a cautiously optimistic tone and said that Washington is pursuing a broader grand bargain aimed at reshaping Iran’s economic integration with the world. Furthermore, United Nations (UN) Secretary-General António Guterres told reporters on Tuesday that the resumption of US-Iran talks is highly probable. The optimism over diplomatic efforts to extend the US-Iran ceasefire has been a key factor behind the recent USD decline to its lowest level since early March, and continues to underpin the Gold.
Meanwhile, data released on Tuesday showed that the US Producer Price Index (PPI) rose to 4% on a yearly basis in March from 3.4% in the previous month. On a monthly basis, the PPI climbed 0.5%, while the gauge excluding Food & Energy was up 3.8% YoY in March. These readings fell short of consensus estimates and eased concerns about the inflationary impact of the war-driven surge in energy prices, tempering hawkish expectations. The resultant decline in US Treasury bond yields should contribute to capping the USD and back the case for the emergence of dip-buyers around the Gold.
XAU/USD 4-hour chart
Gold bulls turn cautious after failing to find acceptance above 200-period SMA on H4
The XAU/USD pair is holding a constructive bullish bias and looking to build on momentum beyond the 200-period Simple Moving Average (SMA) pivotal resistance on the 4-hour chart. Meanwhile, momentum remains strong, with the Relative Strength Index (RSI) at 65.5, edging toward overbought territory, and the Moving Average Convergence Divergence (MACD) rising in positive territory. This hints that bullish pressure persists but may be vulnerable to fatigue on further gains.
In the meantime, initial resistance is seen at the 61.8% Fibonacci retracement level at $4,912.54, and a sustained break above this level would open the way toward the 78.6% retracement at $5,134.37, ahead of the cycle high at $5,416.94. On the downside, the 50% retracement level of the March downfall reinforces the underlying floor at $4,756.73. A convincing break below this would expose deeper supports at the 38.2% retracement level at $4,600.92 and the 23.6% level at $4,408.14, where buyers would be expected to regroup on a more pronounced correction.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.06% | -0.00% | 0.13% | 0.05% | -0.17% | 0.01% | 0.03% | |
| EUR | -0.06% | -0.07% | 0.07% | 0.02% | -0.15% | -0.05% | -0.01% | |
| GBP | 0.00% | 0.07% | 0.15% | 0.11% | -0.08% | -0.01% | 0.05% | |
| JPY | -0.13% | -0.07% | -0.15% | -0.07% | -0.22% | -0.14% | -0.09% | |
| CAD | -0.05% | -0.02% | -0.11% | 0.07% | -0.14% | -0.05% | -0.02% | |
| AUD | 0.17% | 0.15% | 0.08% | 0.22% | 0.14% | 0.10% | 0.14% | |
| NZD | -0.01% | 0.05% | 0.00% | 0.14% | 0.05% | -0.10% | 0.04% | |
| CHF | -0.03% | 0.01% | -0.05% | 0.09% | 0.02% | -0.14% | -0.04% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
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Gold surges as Iran talks hopes dent US Dollar again
Gold (XAU/USD) price surges nearly 2% on Tuesday amid growing optimism linked to the resumption of US-Iran talks, even though the US military seized Iran-linked ships as the blockade of the Strait of Hormuz persists. The XAU/USD trades at $4,835 after bouncing off daily lows of $4,742.
Bullion rallies as softer Oil and Dollar lift haven demand
Geopolitical news continued to drive the markets, with US President Donald Trump grabbing the headlines and hinting at a possible meeting between Washington and Tehran this week. He told the New York Post, “You should stay there, really, because something could be happening over the next two days, and we’re more inclined to go there.”
The Greenback remains on the back foot due to its safe-haven appeal. The markets are pricing in a possible de-escalation of the conflict, as the buck has fallen to a six-week low at 97.96, according to the US Dollar Index (DXY). In the session, the DXY is down 0.26%, also dragged down by Oil prices.
Western Texas Intermediate (WTI), the US crude oil benchmark and a dollar-denominated asset, tanks nearly 6.40% to $91.72 per barrel. The positive correlation between WTI and the DXY, along with the improvement in risk appetite, is the catalyst behind the rise in bullion prices.
The US economic docket featured Federal Reserve (Fed) speakers, jobs, and inflation data. Regarding the US central bank, Chicago Fed President Austan Goolsbee said they might hold rates steady this year and look for rate cuts in 2027 if energy prices remain high due to the Iran war.
The Federal Reserve may need to wait until 2027 to cut interest rates if an extended bout of high Oil prices from the Iran war delays inflation’s progress towards the US central bank’s 2% goal, Goolsbee said.
Governor Stephen Miran said on Monday that he expects inflation to be closer to target in a year, adding that he sees no reason for oil prices to remain elevated.
Inflationary fears have pushed investors to trim their bets on the Fed’s dovish stance, and now money markets are speculating that the Federal Reserve will keep interest rates steady throughout the year, according to Prime Market Terminal (PMT).
Fed interest rate probabilities
On the data front, the US PPI figures undershot forecasts in March, with headline inflation rising 4% YoY, below the expected 4.6%, while core PPI remained unchanged from February’s at 3.8% YoY.
Meanwhile, the ADP four-week average climbed to 39.25K from 26K, reinforcing the narrative of a still-resilient labor market.
Traders’ eyes will be on developments in the Middle East conflict. Data-wise, the US economic docket will feature speeches by Fed officials, the release of the Fed Beige Book, and Initial Jobless Claims data on Thursday.
XAU/USD technical outlook: Gold rally, on its way towards $4,900
Gold’s uptrend accelerated past the $4,800 mark with traders facing strong resistance at $4,857, the April 8 daily high, followed by the 50-day Simple Moving Average (SMA) at $4,896.
Price action suggests that Gold is trading at four-day highs, an indication that buyers are gaining traction, as confirmed by the Relative Strength Index (RSI), which turned bullish two days ago.
If XAU/USD extends its gains past $4,900, the $5,000 milestone is up for grabs. Otherwise, if bullion tumbles below the $4,800 mark, a potential move to the confluence of the 100- and 20-day SMAs, each at $ 4,677 and $ 4,650, is possible.
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.