Gold jumps above $3,350 per ounce

Gold prices remained bullish on Tuesday, breaching the $3,300 per ounce barrier and hitting a new all-time high of $3,353 per ounce. Gold prices have been trading in overbought territory for the past few weeks but continue to rise, boosted by increased safe-haven demand and a weaker dollar. If gold prices rise, they may encounter resistance at the psychological level of $3,400 per ounce, while if gold prices decline, support may be encountered near $2,970 per ounce. 

Gold prices have been registering new all-time highs almost daily and surged to $3,353 per ounce on Wednesday, buoyed by the dollar’s decline and trade war concerns. Demand for safe-haven assets remains elevated, and gold prices may hit fresh historical highs this week. 

Gold prices have typically been directed by the dollar’s movement, as the competing dollar typically loses appeal as an investment when the dollar rises. The dollar resumed its descent on Wednesday after a brief reprieve on Tuesday, and the dollar index dropped to 99.2, its lowest value since January 2022. U.S. Treasury yields also declined, putting pressure on the dollar, with the US 10-year bond yield falling from 4.32% to 4.28%. 

Global trade war concerns have been causing turmoil in markets. Investor confidence is low, raising the appeal of safe-haven assets. US President Donald Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. Trump’s tariffs are likely to raise global inflation and lower the economic outlook, promoting a risk-averse sentiment. 

Last week, Trump announced that he would pause tariffs for 90 days, against all countries, except China. China is one of the leading buyers of gold, and the US taxes may affect its buying power, putting a lid on gold’s ascent. The situation between the US and China is continuously escalating, with both countries announcing heavier tariffs against each other every day. The US raised 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 in 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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