GOLD Analysis
Afternoon: Gold Holds firm as Trade Tensions and Inflation Risks Drive Safe-Haven Demand
Highlights:
- SPDR Gold ETF holdings surge to 904.38 tonnes, the highest since August 2023, indicating strong investor demand.
- Trump’s expanded tariffs heighten inflation concerns, fueling safe-haven demand for gold.
- The upcoming US PCE inflation report could influence Fed rate cut expectations, further impacting gold prices.
Overview:
Gold prices remained firmly above $2,950, staying close to all-time highs, as investors sought refuge in safe-haven assets amid escalating global trade tensions and persistent inflation risks. US President Donald Trump’s recent expansion of tariffs, which now include lumber and forest products, has further heightened concerns about inflation and trade-related economic disruptions. These new measures build upon existing tariffs on imported vehicles, semiconductors, and pharmaceuticals, fueling expectations that global economic uncertainty could continue driving demand for gold as a hedge against risk.
Investor confidence in gold's bullish trend is evident in the rising demand for gold-backed ETFs. The SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), has surged to 904.38 tonnes, marking its highest level since August 2023. This significant increase highlights growing investor interest in gold as a store of value amid concerns over monetary policy uncertainty and geopolitical instability.
Meanwhile, all attention is now shifting to Friday’s US Personal Consumption Expenditures (PCE) report, which serves as the Federal Reserve’s preferred inflation gauge. While forecasts indicate that the data could reveal the smallest price growth since June 2023, persistent inflation pressures remain a major concern. If the PCE index shows continued resilience in inflation, it could reinforce the Fed’s cautious stance on interest rate cuts, potentially delaying monetary easing until later in the year.
Impact of Trade Policies and Fed Decisions on Gold Prices
The gold market is currently being influenced by two key macroeconomic factors: Trump’s trade policies and the Federal Reserve’s rate stance.
- Trump’s Protectionist Measures – The imposition of higher tariffs on multiple sectors has led to increased concerns about higher input costs, potential supply chain disruptions, and inflationary pressures. This has, in turn, supported gold’s appeal as an inflation hedge, as investors look for assets that can preserve value in uncertain economic environments.
- Federal Reserve’s Inflation Strategy – The Federal Reserve has remained reluctant to cut interest rates too soon, citing the need for sustained progress in controlling inflation. Recent Fed statements indicate that policymakers prefer to wait for clearer signs of disinflation before committing to rate reductions. Most analysts now expect the first rate cut in the next quarter, as opposed to the previously anticipated March rate cut.
Gold is highly sensitive to interest rate expectations, as higher rates increase the opportunity cost of holding non-yielding assets like gold, whereas lower rates make gold more attractive. Any delays in Fed rate cuts could prolong gold’s bullish trend, especially if inflation remains stubbornly high or trade tensions continue escalating.
Key Economic Data to Watch This Week
The upcoming economic releases could provide further direction for gold prices:
- German Final GDP q/q (Euro Zone) – A key indicator of economic growth, impacting risk sentiment and potential safe-haven demand.
- S&P/CS Composite-20 HPI y/y (US) – A measure of home prices that could signal broader economic strength or weakness.
- CB Consumer Confidence (US) – A key indicator of consumer sentiment, which could influence expectations for economic growth and inflation.
- Richmond Manufacturing Index (US) – A manufacturing sector performance measure that could provide insights into economic activity and inflationary trends.
Technical Analysis & Trade Strategy
Gold remains in a strong uptrend, supported by geopolitical uncertainties, rising inflation concerns, and cautious Fed policy signals.
- Trade Strategy: Buy on dips around $2,940, targeting $2,970, with a stop-loss below $2,925.
Conclusion
Gold continues to hold above key support levels, driven by rising inflation risks, trade war fears, and cautious Federal Reserve policy. Investors are closely watching macroeconomic data and central bank signals for further cues. With global uncertainties persisting, gold remains a favored asset for hedging against inflation and economic volatility.
Support and Resistance Levels:
