Gold found renewed favour in the first trading session of June as investors sought refuge in safe-haven assets.
The price of gold is up by nearly 2% today, driven by a confluence of factors, notably the weakening US dollar. Several key geopolitical and economic developments are contributing to this surge:
- US-China Tensions: Both the United States and China are accusing each other of violating their recent trade agreement, a dispute that could lead to the re-imposition of substantial reciprocal tariffs.
- Escalation in Ukraine: Intensified attacks between Ukraine and Russia are diminishing prospects for peace negotiations. Representatives from both nations are currently meeting in Istanbul for a second round of talks.
- US Tariff Hikes: The United States is set to increase tariffs on steel and aluminum to 50%, effective June 4th.
Despite a relatively subdued performance in May, with only minimal gains, gold has made a strong comeback in the first session of June, reaffirming its status as a critical safe-haven asset. Goldman Sachs analysts maintain that gold will remain a core holding for investors, serving as a potential hedge against a possible second wave of inflation stemming from the ongoing trade war. Investors also anticipate gold to be among the top-performing assets during a "Sell America" play.
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Gold experienced minimal growth in May but has begun June with significant momentum. Historically, looking at 10-year seasonality, May and June have not typically been the strongest months for the precious metal. Source: Bloomberg Finance LP, XTB
This year, gold is not only the best-performing commodity but also stands out against equity markets, outperforming the record-breaking DAX and the S&P 500, which has returned to positive territory for the year after sharp sell-offs in February and March. Source: Bloomberg Finance LP
Chart Analysis
Gold is currently testing its highest levels since May 23rd, sitting just 2% shy of its highest closing price and 4% below its all-time intraday high. Notably, the strong uptrend remains intact, evidenced by a successful test of the 50-period moving average (green line). Furthermore, the 50.0 Fibonacci retracement level of the most recent downtrend and the 25-period moving average have both acted as support.
Source: xStation5
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