- Gold pops over 1.5% on Monday with more tariff headlines.
- Traders dive into the precious metal as the sole safe haven to withstand tit-for-tat tariff war.
- At this pace, Gold could hit $3,000 quite quickly at this pace.
Gold’s price (XAU/USD) shoots higher on Monday and prints several fresh all-time highs above $2,900 at the time of writing. The move comes after United States (US) President Donald Trump said he would announce “reciprocal tariffs” on many countries on Tuesday or Wednesday, adding to increasing uncertainty in global financial markets. On Sunday, US President Trump said a 25% levy would apply for all steel and aluminum imports into the US, but did not say when they would be applied.
Meanwhile, traders will focus on Federal Reserve (Fed) Chair Jerome Powell’s semi-annual testimony to lawmakers on Tuesday and Wednesday for fresh clues about the path forward for US monetary policy. Powell is likely to highlight the resilient economy as a key reason central bankers are in no rush to cut borrowing costs further. This is a tail risk for Gold as, in theory, it would be a bearish element for bullion.
Daily digest market movers: No timing at all
- Several sources are reporting concerns in China about the current price of Gold. Several Chinese market participants are apparently halting their Gold buying programs for now because prices in the precious metal are too elevated, Bloomberg reports.
- President Trump also flagged plans for reciprocal tariffs, which would increase US import duties to match those imposed by the country’s other trading partners.
- The CME FedWatch tool shows a 93.5% chance that interest rates will remain unchanged in March, compared to a slim 6.5% chance of a 25 basis point (bos) rate cut.
Technical Analysis: Watch out for the main stream
It’s a new week, and the Gold price is already rallying over 1% and printing a fresh all-time high in early trading. Risks with the headline from President Trump are that they will start to be priced in by the time the US session gets underway. The path is quite straightforward, with $3,000 nearing quickly, though quick profit-taking could be just around the corner.
The Pivot Point level on Monday is the first nearby support at $2,866, followed by the S1 support at $2,846. From there, S2 support should come in at $2,832. In case of a correction, the bigger $2,790 level (October 31, 2024, high) should be able to catch any falling knives.
On the upside, the R1 resistance comes in at $2,881, which was already broken earlier this Monday. In case the rally follows through in the European and US sessions, the $2,900 level, which is the confluence of a big figure and the R2 resistance, will be tested for a break to the upside.
XAU/USD: Daily Chart
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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