Gold on track for $3,200 per ounce

Gold prices hit a new all-time high of $3,176 per ounce on Thursday and are poised for more gains. If gold prices rise, they may encounter resistance at $3,200 per ounce, while if gold prices decline, support may be encountered near $2,950 per ounce. 

Gold prices hit a new all-time high of $3,176 per ounce on Thursday, buoyed by the dollar’s decline and trade war concerns. Gold prices have typically been directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar weakened on Thursday, and the index dipped from 103.0 to 101.0. U.S. Treasury yields also gained strength, with the US 10-year bond yield rising from 4.29% to 4.43%.

Concerns that Trump’s trade policies may ignite global trading wars are raising the appeal of safe-haven assets, such as gold. Trump’s tariffs are likely to raise global inflation and lower the economic outlook, thus promoting a risk-averse sentiment. Trump’s economic policies are raising concerns that the US economic growth may slow down, and many analysts are already expressing concerns that the US will enter a recession.

Last week, Trump announced a 10% tariff on all imports into the US, as well as an additional 25% tariff on all imported automobiles. On Wednesday, however, Trump announced that he will pause tariffs for 90 days, against all countries, except China. 

Trump, however, has also announced heavy duties on imports from China. China is one of the leading buyers of gold, and the US taxes may affect its buying power, putting a lid on ascent. The situation between the US and China is continuously escalating, with both countries announcing heavier tariffs against each other every day. Trump announced last week 34% duties on imports from China, and China retaliated with 34% tariffs on US imports, causing the crisis to escalate. Trump further exacerbated matters on Monday by imposing additional 50% tariffs against China. China raised retaliatory tariffs on US goods to 84%, a nd on Thursday, the US increased tariffs on China to 145%, and China retaliated by increasing tariffs on US products to 125%.

Gold prices are supported by rising Fed rate cut expectations. The US Federal Reserve kept interest rates unchanged at its policy meeting in March. FOMC policymakers voted unanimously to maintain the federal funds rate to a target range of 4.25% to 4.50%. Markets are pricing in two more rate cuts this year, with the first rate cut in June, while a third rate cut is also considered possible.

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Written by:
Myrsini Giannouli

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