- Overnight, US President Trump issued unclear and contradicting tariff comments.
- Bullion pressured by strong selling, squeezing out recent buyers in Gold.
- Although US yields drop off further, the precious metal has lost support for now.
Gold’s price (XAU/USD) recovers a part of the big chunk of incurred losses on Thursday after unclear and even contradictory remarks on tariffs. The leg lower came after United States (US) President Donald Trump casted doubts and confusion during a cabinet meeting on Wednesday about what levies will be applied, when and to which countries.
President Trump said “tariffs will go on, not all, but a lot of them” and added that levies on Canada and Mexico imports will go into effect on April 2. Reciprocal tariffs should be installed on April 2 too. The US President confirmed a 25% tariff would be imposed on Europe as well on autos and other things but he did not provide further details.
Daily digest market movers: What if Trump speaks again?
- Overnight markets braced for Nvidia’s (NVDA) earnings. Nvidia’s quarterly sales will be about $43 billion, slightly above analysts’ estimates, but gross profit margins will be tighter than expected due to the rollout of a new chip design called Blackwell. The mixed outlook came in with bad timing as concerns about slowing spending on AI and the potential impacts of US tariffs could mean more headwinds for the company.
- The CME Fedwatch Tool projects a 33.0% chance that the interest rates will remain at the current range in June, with the rest showing a possible rate cut.
- On the US data front, the second reading of the US Gross Domestic Product (GDP) for the fourth quarter is due at 13:30 GMT. Projections are that the GDP annualized will remain stable at 2.3%. The quarterly headline preliminary Personal Consumption Expenditures (PCE), which precedes the monthly PCE on Friday, is expected to continue stable at 2.3% as well. The core PCE number should come in at 2.5%, also unchanged.
Technical Analysis: Important towards the weekend
On Wednesday, a few analysts warned that greedy price action was taking place in Gold, with traders willing to buy at any given price to remain part of the rally. With the current correction, several traders will be facing a squeeze and might soon see their stop losses exercised. This idiosyncratic action will result in more selling pressure and might even see a firm drop lower in Bullion to possibly even $2,860 on the day.
The main element to trigger a turnaround comes at the daily Pivot Point of $2,912. Should Gold fully recover back above that level, it would confirm that traders are buying the current dip. Once through there, $2,934 and $2,951 are levels on the upside to look out for in the form of the intraday R1 and R2 resistances.
On the flip side, Tuesday’s low at $2,890 is starting to give way. Further down, watch out for $2,873 (the S2 support), which could open the door for a test to $2,860.
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.
