- Gold will fall by 0.67% as the US limits tariffs on certain trading partners and alleviates the fear of global trade.
- The US Treasury harvest and the strength of the dollar continue to establish a bullish momentum for gold.
- FED's boss signal will only be one rate cut in 2025, pushing the inflation target up to 2027.
Gold prices extended the decline in trading days for the third consecutive year, as improvements improved with news that mutual tariffs will focus on some US (US) trading partners. At the time of writing, Xau/USD is trading at $3,002, down 0.67%.
Wall Street trades in a positive mood and is bordered higher. The US Treasury bond yields and increased strength in the broader US dollar (USD) prevented bullion prices from extending the rally, with yellow metals exceeding 13% per year.
According to an article in Bloomberg, US President Donald Trump announced on April 2 that he would target certain countries, as opposed to applying mutual tariffs to most countries. Instead, the measure targets so-called Dirty 15 trading partners.
According to data from last year, the Wall Street Journal article The US has the most important commodity trade obstacles with China, the EU, Mexico, Vietnam, Taiwan, Japan, South Korea, Canada, India, Thailand, Switzerland, Malaysia, Indonesia, Cambodia and South Africa.
Data-wise, S&P Global has revealed that US flash PMIs are mixed and manufacturing activities are contracted, but the services sector has been strengthened and improved from the February figures. The divergence highlights the ongoing softness in the industrial sector, which is primarily spurred by tariffs, amid fears of higher prices.
Recently, Atlanta Federal President Rafael Bostic has supported only one rate cut this year, and said inflation has not returned to targets until around 2027. Bostic said he expects inflation to be very bumpy and doesn't think the Fed is behind the curve.
Money Market is priced at 62.5 basis points in 2025. Prime Market Terminal Interest rate probability data.
Source: Prime Market Terminal
Daily Digest Market Mover: Gold Bears in, pushing prices up to $3,000
- Gold prices are under pressure from rising yields at the US Treasury. The US 10-year T-note yields skyrocketed by 4.331%, 8 basis points.
- The US real yield, measured by the US 10th Treasury's inflation-protected securities yield, is up 1.980% to almost 2 bps, correlated inversely with bullion prices.
- The US Dollar Index (DXY), which tracks the performance of the value of the back against a basket of six currencies, rose 0.20% to 104.35.
- The March S&P Global Manufacturing PMI showed a sudden degradation in US factory activities, dropping from 52.7 to 49.8, signaling contractions and lacking expectations for an expansion of 51.7.
- In contrast, the S&P Global Services PMI surged from 51.0 to 54.3, surpassing its 50.8 forecast, highlighting the momentum of the strong service sector.
Xau/USD Technical Outlook: Gold Price Retreats, Stay Nearly $3,000
Traders are booking profits as Xau/USD is threatening to clear the $3,000 figure, but the rising trend in gold prices is in place. The latter violation exposes the swing high on February 24th at $2,956, exposing the $2,900 mark and the 50-day simple moving average (SMA) to $2,874.
Conversely, if bullion remains above $3,000, the initial resistance will be $3,047 at its peak on March 21, followed by the $3,057 height (YTD) and the $3,100 mark.
Gold FAQ
Gold has played an important role in human history as it is widely used as a medium of value and exchange. Apart from the gem's brilliance and usage, precious metals are now widely viewed as safe haven assets. In other words, it is considered a good investment in times of turbulence. Gold is also widely viewed as a hedge against inflation and depreciation currencies, as it is not dependent on a particular issuer or government.
The central bank is the largest holder of money. With the aim of supporting currency in turbulent times, central banks tend to buy gold to diversify reserves and improve the perceived strength of the economy and currency. High gold reserves provide a source of trust in the country's solvency. The central bank added 1,136 tonnes of gold to its bookings in 2022, worth around $70 billion, according to data from the World Gold Council. This is the best purchase every year since the record began. Central banks in emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold is inversely correlated with the US dollar and the US Treasury, both major reserve assets and safe haven assets. As the dollar depreciates, gold tends to rise, allowing investors and central banks to diversify their assets during turbulence. Gold is also inversely correlated with risk assets. While rallies in the stock market tend to weaken gold prices, selling in high-risk markets tends to favor valuable metals.
A wide range of factors allow prices to move. The fear of geopolitical instability or deep recession can quickly escalate gold prices due to their safe conditions. As an asset that does not yield, gold tends to rise at lower interest rates, but the cost of higher money usually weighs the yellow metal. Still, most movements depend on how the US dollar (USD) works, as assets are priced in dollars (Xau/USD). Strong dollars tend to keep the price of gold down, while weaker dollars can push the price of gold up.
