Gold price enters hotspot region with new all-time high possible
- Gold price rockets higher and sprints from sub-$3,000 to $3,132 on Thursday.
- Equity markets are on fire, rallying higher after Trump announced a 90-day pause on reciprocal tariffs.
- Gold could hit a fresh all-time high later in the day.
Gold price (XAU/USD) is delivering a jaw-breaking performance this Thursday in the early trading session, moving around $3,107 at the time of writing. Since Tuesday morning, the precious metal has rallied nearly 5.00%. The main driver for the rally came from United States (US) President Donald Trump, who announced a 90-day pause to higher tariffs on 56 countries and the European Union, which will now be taxed at the 10% baseline rate.
Trump also hiked levies on China to 125%, effective immediately, after the Asian country announced plans to retaliate with an 84% tariff on all US imports to take effect on Thursday. Those moves are exacerbating concerns that the world’s two biggest economies will keep the trade war escalating. The People’s Bank of China (PBOC), China’s central bank, weakened the Yuan (CNY) for the sixth straight session, despite US Treasury Secretary Scott Bessent’s warning the country not to do so on Tuesday. It looks like Beijing will use the country’s currency as a negotiation tool, as it did in the last trade war.
Daily digest market movers: China stimulus drag
- The constant back-and-forth of the US administration’s tariff plan has shaken the entire world, as investors scramble to find direction and certainty. That’s generally been supportive for Gold, which is up 18% this year. The yellow metal has also been bolstered by hopes for more Federal Reserve monetary easing and central bank buying, Bloomberg reports.
- The CME FedWatch tool shows that the chances of an interest rate cut by the Federal Reserve (Fed) in May have decreased to only 19,5% compared with 44.6% seen on Tuesday. For June, the chances of lower borrowing costs are 75.3%.
- Gold is quickly getting back toward recent highs, with today’s boost coming along with a report that Chinese leaders are meeting to discuss stimulus measures. However, there is a bigger picture favoring Gold, which is that other financial assets are failing to retain their value as a safe haven. The precious metal dipped after the 2008 Global Financial Crisis (GFC) and then started a multi-year climb that is still going on. Long-term investors and even central banks are making Bullion a core holding through all market conditions, Reuters reports.
Gold Price Technical Analysis: Gold rallies despite tariffs 90-day pause
The precious metal recovers a two-day loss with a similar sharp move on the back of comments from President Trump and the 90-day delay on tariffs. A delay is just a pause and does not guarantee that deals will be made with all countries. Tensions will brew up again if certain significant trade agreements do not materialize ahead of that 90-day deadline.
The first cap of the R1 resistance at $3,131 is being tested when writing, followed by the current all-time high of $3,167. Just above there, the R2 resistance at $3,180 will come in as a hard cap on the topside.
On the downside, the daily Pivot Point comes in at $3,050 on Thursday, with the March 10 high pivotal level at $3,057. If this area does not hold as support, bears can target the S1 support at $3,002, with the March 14 high at $3,004 and the $3,000 psychological level making this area a strong support zone.
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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