Gold prices hit new record highs as the dollar plummets

Gold prices hit a new all-time high of $3,168 per ounce on Thursday but pared some gains later in the day, dropping to $3,110 per ounce. If gold prices rise, they may encounter resistance at $3,200 per ounce, while if gold prices decline, support may be encountered near $3,000 per ounce. 

Gold prices hit a new all-time high of $3,168 per ounce on Thursday, buoyed by the dollar’s decline. 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.

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 plummeted on Thursday, and the index dropped from 103.2 to 101.4 but pared some losses later, climbing to 102.1. U.S. Treasury yields declined, with the US 10-year bond yield falling from 4.12% to 4.05%.

On Wednesday, Trump announced a 10% tariff on all imports into the US, as well as an additional 25% tariff on all imported automobiles. 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.

Trump, however, also announced 34% duties on imports from China. This is likely to have a heavy impact on China’s economy. 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. 

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.

TRADE GOLD

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: