Gold Price Forecast: XAU/USD climbs above $3,350 as Trump rekindles trade tensions
- Gold price drifts higher to near $3,365 in Monday’s early Asian session.
- Trump's announcement of new tariffs on the EU and broader tariff threats against other trading partners lifted demand for Gold.
- Fed’s Goolsbee said the latest tariff threats could delay rate cuts.
The Gold price (XAU/USD) extends its upside to around $3,365 during the early Asian session on Monday. The precious metal edges higher as traders rushed toward the traditional safe-haven assets after US President Donald Trump widened the global trade war with a fresh wave of tariffs.
On Saturday, Trump said that the United States (US) will impose a 30% tariff on goods from the European Union (EU) and Mexico that will take effect on August 1. Trump also announced a 35% duty on Canadian imports and proposed a blanket tariff rate of 15%-20% on other trading partners last week, along with a 50% tariff on copper imports. Concerns over the impact of Trump's latest tariffs boost the yellow metal as investors seek shelter from trade tensions.
Additionally, the persistent geopolitical tensions in the Middle East might contribute to the Gold’s upside. Reuters reported that at least eight Palestinians were killed and more than a dozen were wounded while collecting water in central Gaza on Sunday. The Israeli military said the missile had been intended to hit an Islamic Jihad militant in the area but that a malfunction had caused it to fall "dozens of metres from the target”. Steve Witkoff, Trump's Middle East envoy, stated on Sunday that he was "hopeful" about the Gaza ceasefire discussions that were taking place in Qatar.
On the other hand, the cautious stance of the US Federal Reserve (Fed) might cap the upside for the precious metal. The US central bank is widely anticipated to hold interest rates steady as it waits to see the impact of tariffs on price pressures. Chicago Fed President Austan Goolsbee said that fresh tariffs unveiled by Trump have further muddied the inflation outlook, making it more difficult for him to support the rate cuts that the President has pressed for.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.