Gold prices took a sharp hit on Thursday, falling 1.50% as investors reacted to the latest tariff announcement by the U.S. President Donald Trump’s reciprocal tariff policy triggered widespread market volatility, pushing traders to take profits and sell off gold holdings.
At the time of writing, gold (XAU/USD) had dropped to $3,095, slipping below key support levels. Investors rushed to liquidate holdings, while global markets struggled to absorb the impact of a 10% minimum global base tariff on imports into the U.S.. The new trade barriers include a 54% tariff on Chinese goods, further intensifying economic concerns.
Market Volatility and Safe-Haven Shifts
The broader market felt the ripple effects. Equities plunged, with global stock markets recording steep declines. Bond yields fell as investors turned to bonds for security. The U.S. dollar weakened against major currencies, reflecting uncertainty over the long-term economic impact of these aggressive trade measures.
While gold is traditionally considered a safe-haven asset in times of crisis, the current market reaction suggests a shift in investor sentiment. Many are choosing to cash in on recent gains rather than hold gold, leading to the current downward pressure on prices.
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Key Market Movements
Despite the selloff, Asian gold producers saw gains as demand for the metal surged amid fears of a global economic slowdown. Meanwhile, the CME FedWatch Tool indicated a 21.5% probability of an interest rate cut in May, with higher chances of a cut in June.
A notable exemption from Trump’s tariff plan is the exclusion of steel, aluminum, gold, and copper imports from additional levies. This provides relief to domestic buyers already dealing with 25% tariffs under Section 232 of the Trade Act of 1962.
Technical Analysis: What’s Next for Gold?
Gold prices are currently facing a correction, aligning with the classic market strategy of “buy the rumor, sell the fact.” However, further movement depends on whether international negotiations ease market tensions or if nations retaliate with counter-tariffs.
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Upside Potential: If market sentiment recovers, gold needs to reclaim $3,149 as the first resistance level, followed by the all-time high at $3,167. A breakthrough could push prices toward $3,200.
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Downside Risks: Immediate support lies at $3,111, which could be tested soon. A further drop could see gold approach $3,089, though a fall below $3,000 is unlikely unless market conditions deteriorate further.
Looking Ahead
The gold market remains on edge as traders monitor ongoing trade negotiations. If global economies respond with retaliatory tariffs, gold could see a fresh rally. However, if diplomatic solutions ease tensions, prices may stabilize or soften further.
For now, gold remains highly sensitive to policy decisions, making it a key asset to watch in the coming weeks.
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