Gold prices edged higher on Tuesday as investors moved away from riskier assets after US President Donald Trump threatened to hike tariffs on Chinese imports, reviving the trade tensions and in turn lifting demand for the safe-haven precious metal.
The spot gold prices rose by 0.1% to 1,281.65 USD per ounce at 06:00 a.m. ET, while the US gold futures fell by 0.1% to 1,282.70 USD per ounce.
The US President Donald Trump on Sunday announced he would hike tariffs on 200 billion USD worth of Chinese goods this week. He also said he would target a further 325 billion USD of Chinese goods with 25% tariffs “shortly”, essentially covering all products imported into the United States from China. Trump’s tariff threat weighed across equity markets around the world, in turn supporting the yellow metal, which is used by investors to hedge against economic and political instability.
The markets reacted immediately to uncertainty about trade talks. It is creating some nervousness in the markets, making traders extremely confused, flipping long and short positions. The price of 1,290 USD per ounce is the key level for gold, and if prices break above that we could see quite an addition on the long side.
Hedge funds and money managers switched to a net long position in COMEX gold in the week to April 30, according to the data from the US Commodity Futures Trading Commission (CFTC). Last week, the mood among gold investors had turned gloomy, pushing the metal to a four-month low after the US Federal Reserve Chairman Jerome Powell dashed hopes of a rate cut this year.
Some investors are also focusing on the tensions in the Middle East and the two catalysts are sufficient enough to hold prices but there is a general reluctance to push prices higher over 1,285 USD per ounce.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, continued a dismal run, falling 0.16% to 739.64 tonnes on Monday, its lowest since October 11. However, physical demand for the metal had been robust last week with India and Singapore leveraging the correction in prices ahead of a key gold-buying festival Aksahya Tritiya.
India Bullion and Jewellers Association National vice president Saurabh Gadgil said he expects 15-20% growth in demand this Aksahya Tritiya. India’s gold demand is expected to rise in the June quarter from a year ago due to a higher number of auspicious days for weddings and a fall in local prices ahead of a key festival.
Meanwhile, silver was down by 0.3% to 14.86 USD per ounce, while
platinum rose by 0.1% to 873.68 USD per ounce and palladium gained 0.2% to 1,339.83 USD per ounce.
Gold price technical analysis
Gold was one of the unsurprising early winners on Monday, as the initial sell-off in equity markets triggered some safe-haven flows. These gains faded as the day went on and investors became generally more calm about the prospects for trade talks but this could be a bullish factor for the yellow metal in the coming days. The dollar has generally performed quite well during any escalation of the trade war and we did see some early support which may have acted as a slight headwind for gold.
Gold extended its sideways consolidative price action through the mid-European session and was seen oscillating in a narrow trading band, just above 1,280 USD level.
After good two-way moves at the start of a new trading week, led by the incoming US-China trade-related headlines, the commodity now seems to have stabilized, albeit struggled for a firm direction and remained well below the 1,287-1,288 USD supply zone.
Despite the latest escalation in the US-China trade tensions, the fact that negotiations will continue this week eased concerns about a full-blown trade war between the world’s two largest economies and dampened the precious metal safe-haven status.
The downside, however, remained cushioned amid a subdued US Dollar price action, which tends to underpin demand for the dollar-denominated commodity, and a negative trading sentiment around European equity markets.
Silver price analysis
During trading yesterday, silver fell from 14.91 USD to 14.87 USD per ounce.
If today the precious metal overcomes the resistance zone at 14.96-14.97 USD, it will test the zone 15.05-15.06 USD. Upon success, the upward movement will continue to 15.16-15.17 USD.
If the silver fells below the support zone 14.77-14.76 USD, then the next support will be the zone 14.65-14.65 USD. In a breakthrough, the downward trend will continue to 14.57-14.56 USD.