The price of gold is struggling to regain its footing above $3,100 as the markets continue to tumble for a second consecutive day. This volatility was set off by former President Trump’s announcement of new reciprocal tariffs, which has shaken market confidence. As a result, investors have been taking profits off the table, adding further pressure on gold prices as they search for support levels to trigger a rebound.
Gold (XAU/USD) is seeing a dip of about 0.6% this Friday, bringing its price down to $3,092. The metal managed to sidestep a total freefall by clawing back some of Thursday’s losses, which had reached more than 2.50% before closing with a modest decline of just 0.65% at slightly over $3,115. Currently, sellers are predominant as traders mull over their strategies and positioning.
Attention now shifts to the release of the U.S. Nonfarm Payrolls (NFP) data, which is set for Friday. Forecasts for the NFP range from 80,000 to 200,000, with a median expectation of 135,000. Federal Reserve Chairman Jerome Powell is scheduled to speak shortly after, perhaps offering reassurance to the markets as anticipation builds that the Federal Reserve might cut interest rates four times before year-end.
According to Bloomberg, gold is poised to capitalize on this year’s turbulent trade, macroeconomic, and geopolitical climates, having risen nearly 18% to date. The CME FedWatch tool currently places the probability of an interest rate cut in May at 33.2%, with a hike foreseen as the stronger possibility, pegged as high as a 9.4% chance for rates remaining unchanged. Market sentiment since Thursday implies expectations for the Fed to take decisive action, possibly influencing interest rates three to four times.
A scenario predicting stagflation in the U.S. could see gold benefiting significantly. As reported by Reuters, gold could emerge as a beneficial asset in such times, and the Atlanta Fed GDPNow Index is presently indicating a -2.84% figure.
In terms of technical analysis, profit-taking largely explains the recent rally in gold prices, leaving room for potential gains as the rally is likely not over. The imminent driving force may shift from tariff-induced anxiety to recession or stagflation fears.
To rally upwards, the daily Pivot Point at $3,112 must be reclaimed, setting sights on the all-time high at $3,167. This level could be the ceiling for Friday, particularly with the R1 resistance just above at $3,170, forming a substantial barrier to further gains. It’s rather unlikely that we’ll see the R2 resistance at $3,226 being tested on Friday.
Support-wise, the S1 support at $3,057 remains a logical starting point, given the bounce it triggered on Thursday. Further down, the $3,000 zone is exposed this Friday, with the S2 support positioned just below at $2,998.
The ongoing economic standoff between the U.S. and China, dating back to 2018, stems from significant trade restrictions and disputes over fair trade practices, with tariffs being a central issue. Despite a temporary reprieve following the US-China Phase One trade deal in January 2020, the COVID-19 pandemic shifted focus away. However, Donald Trump’s return as the 47th U.S. President has reignited tensions, with promises to impose 60% tariffs on Chinese goods. As this trade war resurfaces, it contributes to global economic uncertainty, influencing investment behaviors and inflation indicators like the Consumer Price Index.
