Gold prices have surged to new record levels for the third time this week, fueled by a weakening US Dollar amid escalating trade tensions between the United States and China. At the time of writing, gold (XAU/USD) is trading at $3,342, up more than 3.5%.
The rise in gold prices comes as concerns over a trade war between the two global economic giants intensify. Recently, US President Donald Trump ordered an investigation into imposing tariffs on rare earth imports, which has further strained US-China relations and boosted the demand for safe-haven assets like gold.
Gold reached an all-time high of $3,343 on Wednesday, following a similar surge on Monday. Meanwhile, the US Dollar Index (DXY), which measures the value of the dollar against six major currencies, dropped 0.83% to 99.17.
Fed’s Powell Comments Affect Market Sentiment
Federal Reserve Chair Jerome Powell tempered expectations of imminent rate cuts, citing the central bank’s commitment to ensuring that tariffs do not result in sustained inflation. Speaking at the Economic Club of Chicago, Powell emphasized the importance of keeping long-term inflation expectations stable, warning that a one-time increase in prices should not become a persistent problem.
The latest economic data showed mixed results. US Retail Sales exceeded projections, rising by 1.4% in March compared to the 1.3% forecast, fueled by strong auto sales. However, the control group—used for GDP calculations—rose by just 0.4%, falling short of expectations. Meanwhile, US Industrial Production decreased by 0.3% in March, following a 0.8% increase in February.
Gold Market’s Response to Falling Yields
Gold’s rally has been further supported by a drop in US Treasury yields. The 10-year Treasury yield fell by nearly six basis points to 4.281%, while real yields on Treasury Inflation-Protected Securities (TIPS) dropped by 3.5 basis points to 2.111%. This decrease in yields has failed to cap gold’s upward momentum.
Powell also highlighted the potential risk of stagflation, noting that a combination of high inflation and a weakening economy could create conflicting challenges for the Federal Reserve’s dual mandate of controlling inflation and promoting full employment. This has led market participants to price in 91 basis points of rate cuts by the end of 2025, with the first cut expected in July.
Looking Ahead: Key Data and Market Outlook
As the week progresses, gold traders are awaiting key economic data, including US housing market figures and Initial Jobless Claims. These data points could further influence market sentiment and gold prices.
In terms of technical outlook, gold’s uptrend remains intact, with traders eyeing the $3,350 mark. A breach of this level could see prices testing new record highs, potentially reaching $3,400, and possibly extending toward psychological levels like $3,450 and $3,500. However, if gold falls below $3,300, the first support level is seen at the April 16 low of $3,229, followed by the $3,200 mark.
With trade tensions and economic uncertainty continuing to weigh on the market, gold remains a favored investment, with its appeal as a safe-haven asset strengthening amid global volatility.
Related topics:
- India Surpasses China in Gold Purchases, Buying 51% More in Three Months
- Qilu Bank Enhances Support for Small Businesses with Innovative Financial Tools
- Bitcoin Poised for a Surge Amid Gold’s Delivery Delays, Expert Claims
