Gold surges in response to US President Donald Trump’s tough tariff discussions. Traders remain concerned about recession and growth as the tariff conflict continues.
As retaliatory tariffs approach, traders are increasingly turning to safe-haven assets.
Gold’s price (XAU/USD) rose to a new all-time high of 3,004 earlier this week before falling below $3,000, resulting in a weekly gain of more than 2.5% as of Friday. The increased inflow and demand for bullion came after US President Donald Trump responded to European counter-taxes by threatening to impose 200% tariffs on wine and champagne from the region.
This has frightened market players into assuming that all bets are off and that US President Trump will not back down or soften his stance on tariffs, increasing further fears about growth and demand for risk assets. Meanwhile, US yields reached a new five-day high on Thursday before falling.
Daily market movers: Positioning on tariffs
According to Bloomberg, President Donald Trump’s strong tariff program has raised concerns about the possible impact on growth, reducing demand for risk assets and increasing flows into bullion-backed funds.
Some Chinese jeweler stocks have gained sharply this week. Zhejiang Ming Jewelry Co., which is listed on the mainland, exceeded its 10% gain limit for the fourth consecutive day on Friday. Chow Tai Fook Jewellery Group was also up, indicating that traders are hunting for connected companies that can benefit from rising gold prices, according to Bloomberg.
Technical Analysis: Watch out for profit taking
The $3,000 threshold has come into play rapidly, just a day after French bank BNP Paribas announced that $3,200 would be the target price for gold in the second quarter. With the European and American periods still ahead, a fast surge higher could occur. However, traders should avoid entering on a break of $3,000 because this level is likely to create some short-term profit-taking.
The new all-time high of $2,993 can be withdrawn at any time. Watch for the psychological $3,000 mark on the way up. Beyond that level, it is new ground, with daily Pivot Point resistance and support guiding direction. The daily R1 resistance at $3,007 and the R2 resistance at $3,026 are definitely areas to watch for.
On the downside, the daily pivot point is $2,970. If that level breaks, watch for S1 support around $2,951. Further down, the S2 support is at $2,914, ahead of the $2,900 large figure, which should be strong enough to withstand any corrections.
What are interest rates?
Financial institutions charge interest rates on loans to borrowers, and savers and depositors receive interest. They are influenced by base lending rates, which central banks set in reaction to economic fluctuations. Central banks are often tasked with maintaining price stability, which usually entails aiming for a core inflation rate of roughly 2%. If inflation falls below the target, the central bank may lower base lending rates to stimulate lending and help the economy. If inflation increases far above 2%, the central bank often raises base lending rates in an attempt to reduce inflation.