On Kitco, Mr. Naeem Aslam - Investment Director at Zaye Capital Market commented that this gold price increase is mainly due to three main factors, including trade tensions, doubts about the role of the USD and uncertainty in the policy of the US Federal Reserve (FED).
Trade tensions unresolved
The tax war between the US and China has not shown any signs of cooling down. In such an uncertain environment, investors often turn to gold as a safe haven. Although there are some signs of cooling down, instability still makes the market cautious.
Meanwhile, many expressed concern about the reserve role of the USD. Gold prices often go against the value of the US dollar, because gold is priced in this currency.
Recently, the position of the USD as a global reserve currency has been questioned, especially as China and Russia promote multipolar financial order.
If confidence in the US dollar continues to decline, gold could benefit. Conversely, if the USD recovers to lead, gold may lose its appeal.
Investors are closely watching the Fed's next move after a series of recent interest rate cuts. If the Fed continues to keep interest rates low or cut further, gold will be more attractive because it does not have to compete with yields from profitable assets such as bonds. But if the Fed signals a rate hike, the US dollar could strengthen and send gold lower.
Upcoming event affecting gold prices
The meeting of the Federal Open Market Committee (FOMC) ended at 1:00 a.m. on May 8 (Vietnam time) was considered very important. Although the market does not expect any changes in interest rates, the tone of the FED's announcement will strongly affect gold prices.
If the Fed shows downhill (cautious, maintaining low interest rates), gold could continue to be supported. Conversely, if the FED is leaning towards a hawl (supporting interest rate increases), gold prices may weaken.
Next week, the CPI data will be released. If inflation increases, investors tend to buy gold to prevent the risk of depreciation. But if inflation cools down, the US dollar could recover and gold will lose its appeal.
Gold continues to be an attractive choice in times of uncertainty, supported by political tensions, concerns about the USD and the Fed's caution. The upcoming two key events - the FED meeting and CPI data - will provide a clearer direction for the short-term gold price trend.
Investors should be ready for fluctuations, because any change in monetary policy or inflation can quickly rotate the market.
