- Gold price meets with a fresh supply on Friday, though the downside potential seems limited.
- Trump’s tariffs-inspired risk-off mood might continue to act as a tailwind for the precious metal.
- Fed rate cut bets weigh on the USD and also contribute to limiting losses for the XAU/USD pair.
Gold price (XAU/USD) struggles to capitalize on the previous day’s late rebound from the $3,054 area, or a one-week low, and attracts fresh sellers during the Asian session on Friday. However, the risk-off mood, fueled by growing market concerns that US President Donald Trump’s reciprocal tariffs could dent global economic growth and trigger a recession in the US, helps limit losses for the safe-haven precious metal.
Meanwhile, expectations that the Federal Reserve (Fed) will resume its rate-cutting cycle soon on the back of a tariffs-driven US economic slowdown keep the US Dollar (USD) depressed near a multi-month low touched on Thursday. This, in turn, is seen as another factor lending support to the non-yielding Gold price. Traders also seem reluctant and opt to wait for the release of the crucial US Nonfarm Payrolls (NFP) report.
Daily Digest Market Movers: Gold price bears seem reluctant amid heightened safe-haven demand
- Gold price attracts some sellers for the second successive day on Friday, though a combination of factors should continue to act as a tailwind and limit any meaningful corrective slide from the record high.
- US President Donald Trump rattled global financial markets late Wednesday and unveiled reciprocal tariffs of at least 10% on all imported goods, which could negatively impact the world economy.
- Traders ramped up expectations that the Federal Reserve will resume its rate-cutting cycle in June and lower borrowing costs four times by the year-end as Trump’s trade policies reignite US recession fears.
- The yield in the benchmark 10-year US government bond slides below 4.0% for the first time in six months and fails to assist the US Dollar to build on the overnight bounce from a multi-month trough.
- Meanwhile, data released on Thursday showed that economic activity in the US services sector eased momentum in March, with the ISM Services PMI falling to 50.8 from 53.5 in February and missing estimates.
- Separately, the US Department of Labor (DOL) reported US citizens filing new applications for unemployment insurance ticked lower to 219K for the week ending March 29 from the 225K previous.
- The aforementioned fundamental backdrop favors the XAU/USD bulls. Hence, the modest downtick could be attributed to some repositioning trade ahead of the release of the monthly US employment details.
- The popularly known US Nonfarm Payrolls (NFP) report is expected to show that the US economy added 135K new jobs in March, though the Unemployment Rate is anticipated to hold steady at 4.1%.
Gold price needs to break below $3,056-3,054 pivotal support for bears to seize near-term control
From a technical perspective, any subsequent fall might continue to find decent support near the $2,056-2,054 horizontal zone. The said area nears the 100-period Simple Moving Average (SMA) on the 4-hour chart and should now act as a key pivotal point for short-term traders. A convincing break below might prompt some technical selling and make the Gold price vulnerable to accelerate the corrective slide further towards the $3,036-3,035 intermediate support en route to the $3,000 psychological mark,
On the flip side, the $3,115-3,125 congestion zone now seems to act as an immediate hurdle. This is followed by resistance near the $3,143 area and the all-time peak, around the $3,157-3,158 region touched on Thursday, which if cleared could be seen as a fresh trigger for bullish traders. This, in turn, will set the stage for an extension of the Gold price’s recent well-established uptrend witnessed over the past four months or so.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
Read the full article here