Gold price seesaws above $3,100 as Trump announces tariffs
- Gold price clings to minimal gains, above $3,100 as yields rise.
- US President Donald Trump announces reciprocal tariffs and blanket 10% tariffs on all imports.
Gold price tumbles and trades volatile within the $3,100 - $3135 as US President Donald Trump imposed reciprocal tariffs worldwide, with the details pending of being released. US Treasury bond yields are rising by more than seven basis points to 4.230%
Key takeaways:
US President Donald Trump announced that the US will impose 10% tariffs on all imports and 25% duties on automobiles. These duties become effective on April 3.
As Trump revealed some of the details. Gold seesaws within the $3,100 - $3,135 area,
Gold price reaction
Gold price trades near familiar levels, with no clear direction as traders digest the US trade tariffs details. On further strength, Gold would rise past $3,149, the current record high, and threaten to challenge $3,200. On the downside, a drop below $3,100, the next support would be $3,050.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.