Gold price is building on its rebound from one-month lows of $2,957 early Tuesday, replicating the moves seen in Monday's Asian trading. In doing so, Gold buyers retake the $3,000 threshold, but will they sustain the upswing amid escalating US-China trade tensions.
Gold price is snapping a three-day correction as the US Dollar (USD) has come under renewed selling pressure while the US Treasury bond yields have paused their rebound from six-month troughs.
China's efforts to step up lending to stabilize markets and a generalized recovery in risk sentiment revive the downside for the so-called safe-haven US Dollar. Meanwhile, Gold price also finds support from mounting concerns of an escalating trade war between the US and China.
The Chinese Commerce Ministry warned on Tuesday that it "firmly opposes and will take countermeasures if the US enacts additional 50% tariffs." This came after US President Donald Trump on Tuesday threatened to impose a new 50% tariff, which will be cumulative alongside the US's 10% across-the-board tariffs and targeted 34% "reciprocal" tariffs, which will take effect on Tuesday, April 9.
Additionally, increased expectations that the US Federal Reserve (Fed) could resume its interest rate-cutting cycle from May and deliver a total of five rate cuts in 2025 support the risk reset, while exerting renewed downward pressure on the dollar and US Treasury bond yields. Goldman Sachs now forecasts a total of 130 basis points (bps) in Fed rate cuts for 2025, up from 105 bps previously projected.
If the turnaround in global markets extends into the sessions ahead, the Greenback could see further weakness, leading to a sustained recovery in Gold price.
However, Gold buyers will likely remain wary of fresh developments on the global trade policies front, with the European Union (EU) preparing to impose retaliatory tariffs on US imports after having preferred negotiations.
Furthermore, as the US-China trade war escalates, China's likely refusal to withdraw its latest 34% tariffs could reignite risk aversion across the board, fueling demand for the precious metal as a safe haven.
Source: Fxstreet
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