Gold (XAU/USD) surged past the critical $3,000 mark during the Asian session on Wednesday, retesting its previous high as growing concerns over a global recession sparked by US tariffs continue to bolster safe-haven assets. This move is further supported by rising expectations that the Federal Reserve (Fed) will resume its rate-cutting cycle in May, with multiple rate reductions anticipated by the end of the year. As a result, the US Dollar (USD) has come under pressure, benefiting gold, a non-yielding asset.
Adding to the market volatility, speculation that China is dumping US Treasuries in retaliation for US tariffs has caused US bond yields to rise. This development is limiting gold’s upside potential as traders hesitate to place new bullish bets on the metal. Investors are now looking to the release of the FOMC minutes later today, along with key US inflation data later this week, for further clues on the Fed’s policy direction, which will have a direct impact on both the USD and gold prices.
US Tariffs Drive Global Risk Aversion, Boosting Gold
The US has moved forward with imposing a 104% tariff on Chinese imports starting Wednesday, confirming concerns that a full-scale trade war could trigger a global recession. This uncertainty has fueled a fresh wave of risk aversion, which, in turn, has revived demand for gold as a safe-haven asset.
With the threat of a tariffs-driven economic slowdown in the US, investors are increasingly betting that the Fed will be forced to cut rates. The CME Group’s FedWatch Tool shows that there is now over a 60% chance that the Fed will lower interest rates in May, with expectations for five rate cuts by the end of 2025. This dovish outlook has pushed the USD lower, even in the face of hawkish remarks from Fed officials. San Francisco Fed President Mary Daly emphasized the growing inflation risks from widespread tariffs, while Chicago Fed President Austan Goolsbee highlighted the risks posed to US importers, further stoking concerns about the broader economic impact.
Gold Eyes $3,100 as Momentum Builds
From a technical perspective, gold’s recent decline from record highs appears to have stalled near key Fibonacci support levels, particularly the 61.8% retracement of the February to April rally, around $2,957. A break below this support, with the 50-day SMA near $2,952, could signal a bearish shift, potentially pulling gold towards the $2,920 level.
However, if gold breaks through the $3,022-$3,023 resistance zone, it could accelerate its upward momentum, with the next targets set at $3,055-$3,056. Further buying could pave the way for a test of the $3,100 mark, with intermediate resistance around $3,075-$3,080.
