Gold prices hit all-time highs on tariff concerns

Gold prices hit a new all-time high of $3,149 per ounce on Tuesday and are poised for more gains. If gold prices rise, they may encounter resistance at the psychological level of $3,150 per ounce, while if gold prices decline, support may be encountered near $3,000 per ounce. 

Gold prices remained bullish this week, hitting new record highs every day and reaching a new all-time high of $3,149 per ounce on Monday. Gold prices are trading in overbought territory but remain bullish, driven by geopolitical uncertainty and trade wars concerns and are likely to touch new historical highs in the following days.

Uncertainty over US President Donald Trump’s future policies and trade tariffs promotes a risk-averse sentiment that boosts safe-haven assets. 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. Many analysts are already expressing concerns that the US will enter a recession.

Trump has threatened most countries with heavy tariffs, which will be announced on Wednesday, April 2. Markets will likely experience some turbulence on Wednesday as Trump’s tariffs will hit markets. Most countries will seek to negotiate with Trump’s administration over the implementation of the tariffs, leading to increased market volatility.

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 remained steady on Tuesday, and the index hovered close to 104.2. U.S. Treasury yields declined, with the US 10-year bond yield dropping from 4.20% to 4.18%.

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%. 

The Fed, however, updated its “dot plot”, which is a summary of the central bank’s economic projections and reflects the central bank’s rate outlook. The latest FOMC dot plot indicates that policymakers expect to deliver approximately two more rate cuts this year of 25 basis points each, raising market expectations of future rate cuts. 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. 

Fed Chair Jerome Powell delivered a hawkish message after the policy meeting, stating that the central bank is not in a hurry to lower interest rates. Powell cited economic instability and elevated inflation risks due to trade tariffs as the reasons behind the Fed’s decision to keep interest rates steady.

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Written by:
Myrsini Giannouli

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