GOLD Analysis
Afternoon: Gold Surges to Record $3,500 Amid Fed Politicization Fears, Trade Tensions, and Economic Uncertainty
Highlights:
- Gold hits record $3,500/oz: Up 30% YTD on Fed politicization fears and trade tensions.
- Powell clash intensifies: Threats to remove Fed Chair spark institutional credibility concerns.
- Technical breakout potential: Key resistance at $3,505 buy-on-dips strategy advised.
Overview:
Gold prices soared past $3,460 per ounce, marking a new all-time high, as investors sought refuge from escalating economic and geopolitical risks. The precious metal has rallied over 30% year-to-date, fueled by:
- Risk Aversion: Mounting fears of a global economic slowdown, exacerbated by renewed US-China trade tensions and political volatility.
- Monetary Policy Concerns: President Trump’s renewed attacks on Fed Chair Jerome Powell, including threats to remove him and demands for immediate rate cuts, sparked fears of political interference in central bank independence. This undermines confidence in the Fed’s credibility and raises stagflation risks.
- Trade Uncertainty: Last week’s US probe into tariffs on critical mineral imports (targeting China) threatens to escalate trade hostilities, disrupting supply chains and amplifying market anxiety.
Trump’s Remarks and Fed Politicization
Trump’s criticism of Powell and explicit warnings that the US economy risks stagnation without rapid rate cuts have unnerved markets. His remarks suggest a push to politicize monetary policy, which could:
- Erode trust in the Fed’s ability to combat inflation or stabilize growth.
- Trigger volatility in bond markets and the dollar, as investors question institutional stability.
- Force the Fed into a reactive stance, potentially delaying or accelerating rate cuts in ways that destabilize markets.
US-China Trade Tensions
The US inquiry into tariffs on vital minerals (used in tech, defense, and renewable energy) directly impacts China, a key supplier. Retaliatory measures could:
- Disrupt global supply chains, particularly for semiconductors and electric vehicles.
- Prolong the tariff war, dampening global growth and reinforcing gold’s safe-haven appeal.
Upcoming Economic Data
- Euro Zone Consumer Confidence (June): Expected to remain weak amid growth concerns.
- US Richmond Manufacturing Index (June): A decline could reinforce recession fears and rate cut bets.
Trading Strategy
- Given heightened volatility and extreme RSI readings, exercise caution and avoid chasing highs.
- On the technical front, spot gold is finding near‑term support around $3,450, with immediate resistance at $3,505. The prevailing strategy is to buy on dips around $3,455-50, targeting $3,485/3505 with a prudent stop‑loss placed below $3,440