Gold neared a record high on Monday, as the Trump administration pushes ahead with investigations that could expand the U.S. all-out trade war.
The price of bullion rose to nearly $3,223 an ounce, slightly below its peak recorded in the first trading session of the week by more than $20. The U.S. Commerce Department announced on Monday that it had launched investigations into the impact of semiconductor and pharmaceutical imports on national security, which was a prelude to the imposition of tariffs.
The price of the precious metal has risen by more than a fifth this year as a deepening trade war has weakened global growth prospects, eroded confidence in typically safe U.S. assets and turbulent financial markets. Treasury Secretary Scott Biscent played down the recent sell-off in the bond market, while stressing that his department has the tools to address disruptions when needed.
Meanwhile, Fed Governor Christopher Waller said the inflationary impact of the trade war would be temporary, with a “strong” prospect of a rate cut in the second half of the year. Low borrowing costs usually support gold, which does not generate interest.
Leading banks remain optimistic about bullion prospects in the coming quarters, as investors increase holdings in gold-backed ETFs and central banks continue to accumulate the precious metal.
Thu Lan Nguyen, commodities analyst at Commerzbank, noted that exempting some electronic products from-for-tat U.S. tariffs has eased the atmosphere in the stock market, although expectations were quickly diminished again by the threat of tariffs on these products soon.
Gold may also find support from strong demand in China, the world’s largest bullion market. As the trade war intensified, gold prices saw a rise in speculative trading, as well as inflows into local ETFs.
Gold fluctuates near its top amid trade and interest concerns
Gold rose on Tuesday, but the market appears to be stabilizing after hitting a slight reversal peak on Monday. Prices reached a new record high at the beginning of the week, but closed lower, forming a bearish reversal in the closing price, suggesting that some traders are taking profits and being cautious at these high levels.
The gold/USD pair is trading at USD$3223.00, up $12.33, or +0.38%.
The reversal will only be confirmed if gold surpasses Monday’s low of USD$3193.63. This could open the door to a short-term pullback towards the pivot level at USD$3101.20. Without that, the 50-day moving average at USD$2985.88 remains a strong long-term support level. On the positive side, a breakout of USD$3245.85 will invalidate this pattern, and it is likely to signal another ascending wave.
Talk of a trade war fuels the appetite for safe haven
Gold continues to be supported by safe-haven flows linked to U.S. trade policy. President Trump is pushing for new tariffs on semiconductors and medicines, and announcements are expected this week. Federal filings show that the administration is moving ahead with investigations, keeping markets alert, and supporting gold bullion as a hedging tool.
Federal Reserve policy and interest rate cut bets boost gold
Interest rate expectations continue to be strong support. Federal Reserve fund futures now indicate cuts of 83 basis points for this year. Non-yielding gold usually benefits in a low interest rate environment, especially when the broader economy shows signs of stress. Raffael Bostic, a Federal Reserve official, described the US economy as “in a big halt,” citing a weakening desire to tighten monetary policy.
Gold hits a historic high with demand support and a weak dollar
This may be one of the reasons why the price of gold rose to a new record high of $3245 per ounce at the start of the new week. However, the rise in the price of gold is partly in line with the continued weakening of the dollar, suggesting a gradual erosion of the greenback’s position as a safe haven asset – and gold is likely to be an alternative for many US dollar investors. Recent strong inflows into the world’s largest gold ETF could indicate that as well.
The short-term monetary policy outlook provides further support. The ECB will likely cut interest rates this week, and with U.S. tariff policy creating uncertainty, it will definitely keep the option of further monetary easing on the table The US Federal Reserve’s trajectory of action is less clear, as it faces the risks of inflation and an economic slowdown. Markets still expect a rate cut in June.
Material demand from China adds another support layer
Physical demand from Asia remains strong. Data from the World Gold Council shows that Chinese gold ETFs this month attracted larger inflows than they did in the entire first quarter, surpassing those of U.S. ETFs. China’s new import quotas could push this demand up further.
Gold Price Forecast: Uptrend Persists, Stay Ahead for Short-Term Decline
The long-term trend remains bullish, supported by strong fundamentals and macroeconomic risks. But the short-term outlook tends to be a possible decline. A breakout of the level of USD$3193.63 would open the door to the USD$3101.20 price. If optimists maintain this territory, it could provide new entry. A breach of $3245.85 would confirm the next bullish extension.
