Gold stabilizes as markets brace on reciprocal tariff deadline
- Gold holds ground above $3,000 after Friday’s decline.
- Markets hope US President Trump will ease off on tariffs by April 2.
- Gold is still supported in the $3,000 region, though pressure is building for more downside.
Gold’s price (XAU/USD) stabilizes near $3,020 at the time of writing on Monday as traders assess fresh tariff headlines over the weekend. News emerging that the Trump administration will ease off on the broad scope of tariffs being imposed on April 2 brings sighs of relief in markets. Instead, United States (US) President Donald Trump is said to be looking for more specifically targeted tariffs on specific sectors per country or region.
This helps ease the fear of broad reciprocal tariffs. The idea behind these tariffs is to get companies to reshore back to the US. However, a 25% tariff is not high enough to make the supply chains of corporations untenable, and the Trump administration would actually need to impose import taxes of perhaps 100% to 200%, as well as offer big government subsidies, to get companies to reshore their manufacturing, Marketwatch reports.
Daily digest market movers: Sector moves
- Johannesburg-based firm Gold Fields said Monday it put forward a non-binding proposal to buy the Perth-based company Gold Road Resources for 3.05 Australian Dollars (AUD) a share in cash on March 7, valuing its equity at 3.3 billion AUD and implying a total enterprise value of 2.4 billion AUD. Gold Road’s board rejected the offer, Bloomberg reports.
- Chinese metals producer Zijin Mining Group Co. shares rose more than 5% after the company posted a record profit on surging Gold and Copper prices. Heightened global economic and geopolitical risks, coupled with tariffs, are increasing uncertainty, the company said in a statement after net income surged 52% last year. Rising demand for Gold Exchange Traded Funds (ETFs), as well as central bank purchases, will push bullion higher this year, Reuters reports.
- US tariffs due April 2 are poised to be more targeted than the sprawling ones, according to US officials familiar with the matter. Still, traders remain wary with officials in China and Australia warning of widespread shocks to the global economy from US trade policy, Bloomberg reports.
Technical Analysis: Not defused yet
The softer comments on tariffs will mean a bit less tailwind for Bullion. Expect to see some selling pressure on Gold, though the tailwind will not fade completely. Tariffs are still to come, and even if they are targeted and per sector, it could still severely impact markets and certain countries as long the full-scale scope is not yet communicated.
Regarding technical levels, at the time of writing Gold stabilizes just above the intraday Pivot Point at $3,023. Looking up, the R1 resistance stands at $3,046. Should US President Trump push back on earlier comments from US officials on the scope of the tariffs, for example, the current all-time high at $3,057 could face a new test.
On the downside, some red flags are rising as the intraday S1 support stands at $2,998. That means the $3,000 mark is exposed and needs to act on its own as big support. There is no line of defense before it to make sure any downturn is being slowed. Further down, the S2 support comes in at $2,975.
XAU/USD: Daily Chart
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.
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