- Gold jumps over 1.5% on Monday after President Trump issued more tariff plans.
- Traders go all-in on Gold as safe haven on precious metals.
- Gold could hit $3,000 quite quickly at this pace.
Gold’s price (XAU/USD) is jumping higher as buyers dig into the precious metal on Monday, printing several fresh all-time highs above $2,900 at the time of writing. The move comes after United States (US) President Donald Trump said he would announce "reciprocal tariffs" on many countries on Tuesday or Wednesday, adding to increasing uncertainty in global financial markets. On Sunday, US President Trump said a 25% levy would apply for all steel and aluminum imports into the US, but did not say when they would be applied.
Meanwhile, traders will focus on Federal Reserve (Fed) Chair Jerome Powell’s semi-annual testimony to lawmakers on Tuesday and Wednesday for fresh clues about the path forward for US monetary policy. Powell is likely to highlight the resilient economy as a key reason central bankers are in no rush to cut borrowing costs further. This is a tail risk for Gold as, in theory, it would be a bearish element for bullion.
Daily digest market movers: Hits where it hurts
- Several sources are reporting concerns in China about the current price of Gold. Several Chinese market participants are apparently halting their Gold buying programs for now because prices in the precious metal are too elevated, Bloomberg reports.
- President Trump also flagged plans for reciprocal tariffs, which would increase US import duties to match those imposed by the country’s other trading partners.
- The CME FedWatch tool shows a 93.5% chance that interest rates will remain unchanged in March, compared to a slim 6.5% chance of a 25 basis point (bos) rate cut.
Technical Analysis: US session picking up
It's a new week, and the Gold price is already rallying over 1% and printing a fresh all-time high in early trading. Risks with the headline from President Trump are that they will start to be priced in by the time the US session gets underway. The path is quite straightforward, with $3,000 nearing quickly, though quick profit-taking could be just around the corner.
The Pivot Point level on Monday is the first nearby support at $2,866, followed by the S1 support at $2,846. From there, S2 support should come in at $2,832. In case of a correction, the bigger $2,790 level (October 31, 2024, high) should be able to catch any falling knives.
On the upside, the R1 resistance comes in at $2,881, which was already broken earlier this Monday. In case the rally follows through in the European and US sessions, the $2,900 level, which is the confluence of a big figure and the R2 resistance, will be tested for a break to the upside.
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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