GOLD Analysis
Afternoon: Gold Drops Amid Stronger US Dollar and Fresh Tariff Announcements
Highlights:
- Gold drops to below $2,875 as the US dollar strengthens amid fresh Trump tariffs.
- US GDP growth holds at 2.3% in Q4, but rising jobless claims raise concerns.
- China’s gold demand weakens, with Swiss shipments to China plummeting 99%.
Overview:
Gold prices climbed above $2,870 per ounce, fueled by growing concerns over US President Donald Trump's tariff policies, which drove investors towards the safe-haven metal. The proposed tariffs on Mexican and Canadian goods, set to take effect on March 4, along with an additional 10% tariff on Chinese imports, have heightened fears of trade retaliation and economic uncertainty, increasing gold’s appeal.
Market Drivers and Economic Outlook
The inflationary impact of these tariffs is also supporting gold prices, as investors seek a hedge against rising costs and currency fluctuations. Traditionally, gold performs well during periods of high inflation and geopolitical uncertainty, making it a preferred asset in the current market climate.
Additionally, the US dollar weakened from its two-week high, making gold cheaper for international buyers, further driving demand. A weaker dollar typically enhances gold's attractiveness, as it reduces the cost for holders of other currencies.
Further strengthening gold’s position, concerns over the US economic outlook are growing. Market participants expect the Federal Reserve to cut interest rates in the coming months, as data points to slower economic growth and rising unemployment claims. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, increasing demand for bullion.
Technical Analysis and Trade Strategy
- Key support levels are identified at $2,850, while resistance is set at $2,890.
- On the MCX market, support is seen at ₹83,800, while resistance is near ₹84,700.
- Recommended action: Buy on dips around $2,860, targeting $2,885, with a stop loss below $2,850 to manage downside risk.
Support and Resistance Levels:
