Gold Steadies After Record Highs, Trade War Fears Linger

Gold stabilized after experiencing significant volatility during Asian trading hours, influenced by escalating concerns over a potential global trade war.

Record Surge

Bullion reached a historic high above $2,942 per ounce before retreating slightly. The spike followed President Donald Trump's imposition of tariffs on U.S. steel and aluminum imports, further fueling uncertainty in global markets. Trump also hinted at potentially increasing the tariffs.

Safe Haven Status

Gold's value has appreciated by approximately 11% this year, setting consecutive records. President Trump's disruptive trade and geopolitical actions have reinforced its role as a store of value during periods of uncertainty.

Market Implications

Traders are closely monitoring the potential consequences of the White House's policies on the U.S. economy and monetary policy, particularly concerning inflation and growth subdued. Federal Reserve Chair Jerome Powell's testimony before Congress this week will provide insights into monetary policy direction.

Inflationary Pressures

Short-term U.S. inflation expectations have exceeded long-term expectations, the widest divergence since 2023. This trend could justify a slower pace of monetary easing, which could negatively impact gold, given its lack of interest-bearing properties.

ETF Inflows

Gold's ascent has coincided with inflows into bullion-backed exchange-traded funds (ETFs). Global holdings have increased for six of the past seven weeks, reaching their highest levels since November.

Target Prices

Banks anticipate that gold could soon test the $3,000 per ounce mark. Citigroup Inc. forecasts that this level could be attained within three months, driven by geopolitical tensions and trade wars. JPMorgan Private Bank predicts a year-end target of $3,150 per ounce.

Volatility Expected

"Until we have clarity on U.S. policies, both trade-related and economic, it will create an environment for increased levels of gold volatility," said Joseph Cavatoni, senior market strategist at the World Gold Council.

Technical Indicators

Gold's 14-day relative-strength index (RSI) has approached 80, indicating a potential overbought condition. This suggests that a pause in the surge may be imminent.

Producer Gains

The price rally has positively impacted gold producers' stocks. In Hong Kong, Zijin Mining Group Co. surged by over 4%, while in Australia, Northern Star Resources Ltd. reached a record high, with a 20% gain this year.