Gold Prices Could Surge to $3,000 Amid Tariff Tensions and Dollar Strength
Gold prices slipped nearly 1% on Monday, retreating from an all-time high as the U.S. dollar gained strength.
Live XAU/USD Chart
Gold prices slipped nearly 1% on Monday, retreating from an all-time high as the U.S. dollar gained strength.
The U.S. dollar index (.DXY) hovered near a three-week peak, making dollar-denominated gold less attractive for foreign buyers. This decline follows heightened concerns over a potential global trade war triggered by U.S. President Donald Trump’s sweeping tariff measures.
Trump’s announcement of 25% tariffs on imports from Canada and Mexico, along with a 10% levy on Chinese goods effective Tuesday, has unsettled financial markets. Both Canada and Mexico swiftly retaliated with their own tariffs, while China vowed to challenge the U.S. measures at the World Trade Organization and implement unspecified countermeasures. These developments have created a complex environment for gold, traditionally seen as a safe-haven asset during periods of economic and geopolitical turmoil.
Trade Tensions Shape Gold’s Outlook
Despite the recent pullback, analysts maintain a cautiously optimistic outlook for gold in the medium term. Tim Waterer, Chief Market Analyst at KCM Trade, highlighted the conflicting forces at play. While escalating trade tensions fuel demand for safe-haven assets like gold, the strengthening U.S. dollar acts as a headwind.
Key Insights:
- Support Level: Gold must hold above $2,750 to prevent a more significant correction.
- Resistance Zones: A breakout above $2,793.87 could trigger renewed bullish momentum toward $2,816.03.
- Bullish Catalyst: Further tariff escalations could drive gold prices to $3,000, according to Citi analysts.
J.P. Morgan’s report suggests that while short-term pressures from equity market volatility might weigh on gold, the broader impact of disruptive tariffs supports a bullish scenario in the medium term. The interplay between risk-off sentiment and currency dynamics remains a critical factor influencing gold’s trajectory.
Technical Insights Signal Bullish Potential
On the technical front, gold continues to trade within an ascending channel on the 2-hour chart, reflecting a bullish undertone despite recent volatility. The price has pulled back from its recent high near $2,816.03, finding support around the lower boundary of the channel and the 50-period Exponential Moving Average (EMA) at $2,778.18. This EMA level acts as a pivotal support zone, with buyers stepping in to defend the uptrend.
Immediate resistance is observed at $2,793.87, with further upside potential toward $2,816.03 and $2,831.69 if bullish momentum persists. Conversely, a break below $2,778.18 could expose gold to key support levels at $2,753.48 and $2,734.79. Maintaining price action above these levels is crucial to sustaining the bullish outlook.
Citi’s forecast suggests that if trade tensions escalate further, gold could breach the $3,000 mark, supported by increased safe-haven demand. This aligns with historical patterns where geopolitical risks have driven significant rallies in gold prices.
Conclusion
In summary, while gold faces short-term pressure from a strong U.S. dollar, escalating global trade tensions could reignite demand, potentially pushing prices beyond $3,000 per ounce.
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