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Gold retains bullish bias near record high amid US tariff woes, sustained USD selling

  • Gold price continues to attract safe-haven flows on Monday amid trade-related uncertainties.
  • The USD dived to a two-year low amid recession fears that further benefit the XAU/USD pair.
  • Overbought conditions on the daily chart warrant caution before placing fresh bullish bets.

Gold price (XAU/USD) sticks to its strong intraday gains near the all-time peak through the Asian session on Monday and remains well within striking distance of the $3,400 round figure. Investors remain worried about the potential economic fallout from US President Donald Trump’s aggressive tariffs and the rapidly escalating US-China trade war, which continue to boost demand for the traditional safe-haven precious metal.

Furthermore, investors have been losing confidence in the US economy amid the uncertainty over Trump’s trade policies. Apart from this, bets that the Federal Reserve (Fed) will resume its rate-cutting cycle soon drag the US Dollar (USD) to its lowest level since April 2022 and further benefit the non-yielding Gold price. The XAU/USD bulls, however, might pause for a breather amid overstretched conditions on the daily chart.

Daily Digest Market Movers: Gold price continues to benefit from a combination of supporting factors

  • Investors remain worried about the potential economic fallout from US President Donald Trump’s trade tariffs and the rapidly escalating US-China trade war, pushing the safe-haven Gold price to a fresh all-time peak on Monday. In fact, Trump recently imposed tariffs of up to 145% on certain Chinese goods, with some duties reportedly reaching 245%. In retaliation, China has levied tariffs of 125% on US products.
  • Meanwhile, Trump’s aggressive trade policies could hurt the world trade order and trigger a recession in the US. This, in turn, drags the US Dollar to its lowest level since April 2022 and further benefits the precious metal. The USD bulls shrugged off Federal Reserve Chair Jerome Powell’s hawkish comments, saying that the central bank is well-positioned to wait for more clarity before making any changes to the policy stance.
  • Furthermore, market participants are still pricing in the possibility that the Fed will resume its rate-cutting cycle in June and lower borrowing costs by a full percentage point by the end of this year. This turns out to be another factor that contributes to driving flows towards the non-yielding yellow metal, amid thin trading conditions on the back of the Easter Monday holiday and despite overbought conditions on the daily chart.
  • Iran and the US agreed on Saturday to commence expert-level discussions to design a framework for a potential nuclear deal. Moreover, Russian President Vladimir Putin’s one-day ceasefire in Ukraine on Saturday sparked hopes that tensions could de-escalate. This, however, does little to boost investors’ confidence or dent demand for traditional safe-haven assets, supporting prospects for a further appreciation for the XAU/USD pair.
  • There isn’t any relevant market-moving economic data due for release from the US on Monday, though a scheduled speech from Chicago Fed President Austan Goolsbee might influence the USD. Apart from this, trade-related developments should provide some impetus to the commodity. The market focus will then shift to the release of flash PMIs on Wednesday, which should offer a fresh insight into the global economic health.

Gold price bulls might pause for a breather amid overbought RSI on the daily chart

From a technical perspective, the relentless buying validates the near-term positive outlook for the Gold price. However, the daily Relative Strength Index (RSI) is holding well above the 70 mark and might force bullish traders to pause for a breather. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before positioning for an extension of a multi-month-old uptrend.

In the meantime, any corrective slide might now find some support near the $3,350 zone. This is followed by the Asian session low, around the $3,329-3,328 region, below which the Gold price could accelerate the fall towards the $3,300 round figure en route to Friday’s swing low, around the $3,284 area. The latter should act as a key pivotal point, which if broken decisively could pave the way for deeper losses.

Tariffs FAQs

Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

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