Gold edges higher after Trump hints at more tariffs
- Gold holds ground above $3,000 on Monday after a recent decline from all-time highs.
- US President Trump to impose more tariffs on cars and against countries buying Venezuelan Oil.
- Gold is still supported in the $3,000 region, though pressure is building for more downside.
Gold’s price (XAU/USD) stabilises near $3,020 at the time of writing on Tuesday as traders assess fresh tariff headlines from United States (US) President Donald Trump. The president issued an executive order on Monday to impose “secondary tariffs” of 25% on all imports from those countries buying Oil from Venezuela, which would mean a sharp rise in levies on goods from China and India.
On Monday, Trump said reciprocal tariffs will be eased off for countries meeting US requests on reshoring their businesses and factories. He went further and said tariffs on cars, aluminum and pharmaceuticals will be issued in the very near future. Trump also added that lumber and chips could be a potential tariff target as well.
Daily digest market movers: Sector moves
- Gold is finally drawing decent volumes into bullion-backed Exchange Traded Funds (ETFs), in what has been one of the more interesting developments in commodities in the near end of the first quarter of 2025. If sustained, it augurs well for prices in the second quarter of the year, Bloomberg reports.
- In the takeover story between Australia’s Gold Road Resources and South Africa’s Gold Fields, Gold Road Resources chief executive Duncan Gibbs says a $3.3 billion takeover bid from Gold Fields is too low, describing the proposal from the Johannesburg-listed miner as extremely aggressive and hostile, Reuters reports.
- A proposal from the Trump administration to impose levies on Chinese-made ships entering US ports is sowing panic in the US agriculture industry, with farmers saying the added cost threatens to upend exports of wheat, corn and soyabeans, the Financial Times reports.
- Trump has come up with a new weapon of economic statecraft on Monday after threatening with “secondary tariffs” on countries that buy Oil from Venezuela to choke off its oil trade with other nations. This was triggering additional tariff concerns with markets seeing this as a secondary way to impose still vast amounts of tariffs without making them reciprocal, Bloomberg reports.
Technical Analysis: Not defused yet
The bounce is getting underway this Tuesday after US President Trump’s comments about issuing ‘secondary’ tariffs. His administration is looking to ease off the reciprocal approach. This will make the entire assessment of levies and how to quantify them even more difficult.
On the upside, the daily R1 resistance comes in at $3,028. Further up, the R2 resistance at $3,046 coincides with Friday’s high and the R1 resistance from Monday. This means that this level is a heavy barrier before pointing to the current all-time high at $3,057.
On the downside, some red flags remain as the intraday S1 support stands at $2,997. That means the $3,000 mark is exposed and needs to act on its own as big support. There is no line of defense before to make sure any downturn is being slowed. Further down, the S2 support comes in at $2,984.
XAU/USD: Daily Chart
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.