Gold prices continue to hover near all-time highs as the precious metal benefits from growing concerns over the potential economic impact of US President Donald Trump’s aggressive tariffs. During Monday’s Asian session, gold remained firmly in positive territory, staying close to the $3,400 mark, bolstered by heightened demand for safe-haven assets amid escalating US-China trade tensions.
Investors are increasingly wary of the economic fallout from the trade war, which has driven Trump to impose tariffs of up to 145% on certain Chinese goods, with some duties rising as high as 245%. In retaliation, China has levied tariffs of 125% on US products. This escalation has spurred fears of a global recession, leading to a decline in the US Dollar (USD) to its lowest levels since April 2022. The weakening dollar, coupled with expectations that the Federal Reserve will soon resume its rate-cutting cycle, has further bolstered gold’s appeal as a non-yielding asset.
Despite these strong tailwinds for gold, market participants are eyeing potential pauses in the current rally. The price has reached overbought levels, as indicated by the Relative Strength Index (RSI), suggesting that a short-term consolidation or pullback might be on the horizon.
Market Drivers and US Economic Concerns
Gold’s rally is supported by a mix of factors, chief among them the ongoing trade war between the US and China. Trump’s recent tariff impositions, combined with fears that these policies could harm global trade and trigger a US recession, have caused further declines in the USD. While Federal Reserve Chair Jerome Powell has made hawkish remarks about the central bank’s readiness to wait for more economic clarity before adjusting policy, market expectations continue to lean toward the Fed resuming its rate cuts, possibly as early as June.
This outlook has pushed the USD to multi-year lows, offering a further tailwind for gold. Despite the lack of major economic data from the US on Monday, market participants are closely watching trade developments. A scheduled speech by Chicago Fed President Austan Goolsbee and updates on trade negotiations could provide further direction for the USD and, by extension, gold.
Global Geopolitical Tensions Support Safe-Haven Demand
The geopolitical landscape remains tense, as the US and Iran agreed to initiate expert-level discussions on a potential nuclear deal. Meanwhile, Russian President Vladimir Putin declared a one-day ceasefire in Ukraine, fueling hopes of a de-escalation in the conflict. However, these developments have done little to dampen demand for safe-haven assets like gold, reinforcing its upward momentum.
Looking ahead, the market’s focus will shift to the release of flash Purchasing Managers’ Index (PMI) data on Wednesday, which could offer new insights into the global economy and impact market sentiment.
Technical Outlook for Gold
From a technical standpoint, gold’s recent surge suggests a positive near-term outlook. However, the RSI has reached overbought levels, above the 70 threshold, indicating that bullish momentum may be losing steam. Traders are advised to wait for a brief consolidation or a modest pullback before seeking new positions for the continuation of the multi-month uptrend.
In the event of a correction, gold prices may find support around the $3,350 level, followed by the $3,329-$3,328 region. A significant drop below these levels could lead to further declines, potentially testing the $3,300 mark, followed by the swing low of $3,284. A decisive break below this level could signal deeper losses in the near term.
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