GOLD Analysis
Afternoon: Gold Rally Amid Trade War Uncertainty and Technical Support Dynamics
Highlights:
- Gold rallied over 20% this year amid trade war probes and safe-haven demand, with forecasts projecting a rise to $4,000/oz by mid-2026.
- Technical levels indicate solid support at $3,193.63 and bullish momentum above the 61.8% Fibonacci retracement at $3,221.12, targeting resistance near $3,238.25.
- Despite investor anxiety from potential new tariffs, gold maintains stability on international and Indian bourses, supported by strong volume and technical recovery.
Overview:
Recent developments in global trade and market dynamics have driven significant movements in gold prices. The Trump administration has initiated probes into semiconductor and pharmaceutical imports, signaling potential levies amid an escalating trade war. This increased geopolitical tension has dampened prospects for global growth, eroded trust in traditionally safe US assets such as Treasuries, and created widespread volatility in financial markets.
In this environment of heightened uncertainty, gold has rallied by more than a fifth this year, underpinned by safe-haven buying as investors seek refuge from the turmoil. Treasury Secretary Scott Bessent minimized the impact of recent bond market selloffs, emphasizing that his department is equipped to manage dislocations if needed. Meanwhile, Federal Reserve Governor Christopher Walker noted that any inflationary pressures from the trade conflict are expected to be temporary, with significant interest-rate cuts on the horizon in the second half of the year. Lower borrowing costs typically benefit gold, which does not yield interest, thus bolstering its appeal in the current economic landscape.
Leading banks remain optimistic about gold's prospects over the coming quarters. Investors are increasingly adding to holdings in gold-backed exchange-traded funds, while central banks continue to accumulate the metal. This positive sentiment is reinforced by forecasts from Goldman Sachs Group Inc., which predicts that gold could rally to $4,000 an ounce by mid-2026.
On the technical front, gold is trading slightly higher on international bourses as prices appear firm in the morning session. Following a recovery from a support level near $3,193, which has acted as a strong buying zone, the price is now holding above the key 61.8% Fibonacci retracement at $3,221. This technical signal suggests bullish momentum is likely to extend toward a resistance level of approximately $3,238. Increased trading volume supports this rebound, indicating strong buyer interest and a likely temporary upmove. In summary, gold is trading in a range-bound to slightly higher manner on Indian bourses for the day, as its prices hold steady just below the record high established at the week’s open, despite ongoing investor anxiety surrounding additional US tariffs.
- Support: $3,193.63 marks yesterday’s low and serves as a recent strong buying zone that has helped stabilize gold prices.
- Resistance: $3,238.25 represents the 100% Fibonacci extension level and a recent ceiling, potentially capping further short-term gains.
- Pivot/Key Zone: $3,221.12, the 61.8% Fibonacci retracement level, is a critical support area, underpinning current positive price action and suggesting bullish momentum may extend.
Trade Action:
The action plan outlined for traders involves buying on drop around $3,218, targeting a move up to $3245 and 3315, while maintaining a stop loss below the crossed resistance zone at $3,207. Such a strategy is designed to capitalize on anticipated pullbacks while managing downside risk effectively.
Support & Resistance Levels:
