- Gold price regains positive traction as US tariff uncertainty continues to underpin safe-haven assets.
- Bets for aggressive Fed rate cuts in 2025 keep the USD depressed and also benefit the XAU/USD pair.
- Trump’s temporary tariff reprieve improves global risk sentiment and might cap the commodity.
Gold price (XAU/USD) sticks to its positive bias comfortably above the $3,200 mark through the Asian session on Tuesday and remains close to the all-time peak touched the previous day. The growing market concerns about the escalating US-China trade war and its impact on the global economy continue to underpin demand for the safe-haven bullion. Moreover, rising bets for more aggressive policy easing by the Federal Reserve (Fed) and the underlying bearish sentiment surrounding the US Dollar (USD) turn out to be other factors benefiting the non-yielding yellow metal.
Meanwhile, US President Donald Trump’s temporary tariff reprieve on key consumer electronics and signal that he may temporarily exempt the auto industry from the 25% levies remain supportive of the upbeat market mood. This, in turn, is holding back traders from placing fresh bullish bets around the Gold price. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for the XAU/USD remains to the upside. Hence, any corrective pullback might still be seen as a buying opportunity and is more likely to remain limited.
Daily Digest Market Movers: Gold price remains well supported by concerns over the escalating US-China trade war
- Concerns about the potential economic fallout from US President Donald Trump’s aggressive trade policies continue to underpin safe-haven assets. Meanwhile, China increased tariffs on US imports to 125% on Friday in retaliation to Trump’s decision to raise duties on Chinese goods to an unprecedented 145%. This keeps the Gold price close to the all-time peak touched on Monday.
- The US still imports several hard-to-replace materials from China and the developments seem to have weakened confidence in the US economy. Moreover, heightened concerns over a US recession, along with bets that the Federal Reserve (Fed) would resume its rate-cutting cycle soon and lower borrowing costs at least three times in 2025, fail to assist the US Dollar in registering any meaningful recovery.
- Fed Governor Christopher Waller said the Trump administration’s tariffs posed a significant shock to the US economy that might force the US central bank to cut rates to avert a recession. Separately, Atlanta Fed President Raphael Bostic noted that we still have a ways to go on inflation as tariffs could place upward pressure on prices. The Fed is unable to make bold moves in any direction, Bostic added.
- The global risk sentiment improved after the White House announced on Friday that smartphones, computers, and other electronics would be temporarily exempted from Trump’s punishing reciprocal tariffs. Furthermore, Trump said on Monday that he was looking into possible exemptions for the auto industry from the 25% tariffs as companies need more time to transition to US-made parts.
- Trump, however, said that exemptions were temporary and added that he would unveil tariffs on imported semiconductors over the next week. Trump also threatened that he would impose tariffs on pharmaceuticals in the not-too-distant future. This continues to fuel uncertainty, which, along with the underlying bearish sentiment surrounding the USD, lends some support to the XAU/USD pair.
- Traders now look to Tuesday’s US economic docket, featuring the release of the Empire State Manufacturing Index. This, along with trade-related developments, might influence the USD and provide some impetus to the commodity. The focus, however, remains on Fed Chair Jerome Powell’s speech on Wednesday, which might offer cues about the future rate-cut path and drive the non-yielding yellow metal.
Gold price technical setup supports prospects for a move back towards testing the all-time peak, around $3,245-3,246
From a technical perspective, the overnight bullish resilience below the $3,200 mark and the subsequent move up suggest that the recent well-established uptrend for the Gold price is still far from being over. However, the daily Relative Strength Index (RSI) remains close to the overbought territory and makes it prudent to wait for some near-term consolidation or a modest pullback before positioning for any further gains. Hence, any further strength is more likely to confront stiff resistance near the $3,245-3,246 area, or the record high touched on Monday.
On the flip side, weakness below the $3,200 round figure might still be seen as a buying opportunity and is more likely to remain cushioned near the $3,168-3,167 region. The latter should act as a strong base and a key pivotal point for short-term traders, which if broken decisively could pave the way for a deeper corrective slide. Gold price might then fall to the $3,136 intermediate support en route to the $3,115 region and the $3,100 mark.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
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