Gold price falls as markets reposition on Trump’s tariffs, the highest in over 100 years
- Gold price slips to $3,116 in a volatile trading session for the precious metal.
- Markets are shaky after US President Trump issued the most harsh tariffs in over a century.
- Gold traders are starting to take profit on the ‘sell the fact’ narrative.
Gold price (XAU/USD) falls after initially hitting a fresh all-time high at $3,167 in the early Asian session. Traders are starting to take profit, pushing the Bullion price to $3,130 at the time of writing on Thursday. Markets see all asset classes absorbing the overnight shocking statement from United States (US) President Donald Trump, who unleashed his reciprocal tariff plan onto the world.
Traders are still mulling over the meaning of the announcement where a global base tariff of 10% is the minimum to apply to any country in the world importing into the US. From there, all other earlier levies remain in place, which means, for example, a total of 54% tariff on China applicable as of this Thursday. Markets are seeing safe haven flow with Equities dropping multiple percentages globally, bond yields falling as Bonds are bid and the US Dollar (USD) devaluing against all major currencies.
Daily digest market movers: Can it get any worse than this?
- Asian Gold producers rise after the precious metal hit a record high as US President Donald Trump’s “reciprocal” tariffs stoke fears of a global economic slowdown and raise demand for haven assets, Bloomberg reports. The move goes against the overall global selloff seen in Equities.
- The CME FedWatch tool sees chances for an interest rate cut in May standing at 21.5%. A cut in June is still the most plausible outcome, with only a 27.5% chance for rates to remain at current levels. In the overall yield curve a shift is noticed that a longer pause from the Fed might play out here.
- Going back to the White House fact sheet in detail, Steel, Aluminum, Gold and Copper imports won’t be subject to reciprocal tariffs, providing at least some relief to domestic buyers who are already bearing the cost of 25% tariffs under Section 232 of the Trade Act of 1962 on all imports of some key metals, Reuters reports.
Gold Price Technical Analysis: Buy the rumor, sell the fact
A logical turn of events is taking place in Gold price this Thursday as the dust settles over the implementation of reciprocal tariffs by the Trump administration. The “buy the rumor, sell the fact” was the proverb FXStreet was already alluding to in past articles, and that is currently playing out. With negotiations and possible deals being brokered between the US and other countries to circumvent Trump’s tariffs, sentiment can only improve from here, meaning a softening in the Gold price.
On the contrary, should countries start to issue retaliation tariffs, Gold could stretch higher with fresh all-time highs being forecasted.
On the upside, the daily R1 resistance at $3,149 is the first level that needs to be reclaimed again, followed by the $3,167 fresh all-time high. That roughly coincides with the R2 resistance at $3,165. Beyond that, the broader upside target stands at $3,200.
On the downside, the S1 support at $3,111 is quite close, though it could still be tested without completely erasing this week’s gains. From a technical point of view, avoiding a break of this week’s low is essential. Further down, the S2 support at $3,089 should ensure that Gold does not fall back below $3,000.
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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