- Gold price surges past $3,000, reaching a record high amid Trump’s reciprocal tariffs and geopolitical uncertainty.
- Middle East tensions escalate, with renewed Israel-Hamas hostilities adding to bullion’s 15% year-to-date gain.
- Traders bet on June Fed rate cuts, as falling US Treasury yields and a weaker US Dollar support gold’s uptrend.
Gold price skyrockets past the $3,000 figure and hit a record high of $3,038 on Tuesday amid uncertainty on United States (US) President Donald Trump’s reciprocal tariffs to be enacted on April 2, while traders eye Federal Reserve’s (Fed) monetary policy decision. XAU/USD is trading at $3,037, up by 1.20%.
Risk appetite remains deteriorated, even though talks between Trump and Russian President Vladimir Putin relieved some of traders’ stress with the latter agreeing to a 30-day halt on attacking Ukraine energy facilities, according to Reuters. Nevertheless, the Bullion rally continued with the precious metal gaining over 15% in the year so far.
Hostilities in the Middle East between Israel and Hamas sparked a leg-up in XAU/USD, as Israel strikes killed more than 400 people in Gaza, threatening a two-month ceasefire, revealed Reuters.
Data-wise, the US economic schedule revealed that Industrial Production improved in February. Contrarily, housing data was mixed, with Building Permits falling off the cliff, while Housing Starts rose sharply, revealed the US Census Bureau.
According to the CME Group’s FedWatch Tool, traders expect the Fed to keep interest rates unchanged on Wednesday. However, they see nearly a 66% chance of a rate cut in June.
In the meantime, Bullion continued to climb, sponsored by falling US Treasury yields and a weaker US Dollar. The US 10-year T-note yield drops one basis point to 4.183%. At the same time, the US Dollar Index (DXY), which tracks the buck’s performance against a basket of six currencies, falls 0.17% to 103.23.
Daily digest market movers: Gold price poised to extend rally as real yields tumble
- US real yields, as measured by the US 10-year Treasury Inflation-Protected Securities (TIPS) yield, which correlates inversely to Gold prices, dropped one and a half bps to 1.985% via Reuters.
- US Industrial Production expanded 0.7% MoM in February, exceeding the 0.2% forecast and accelerating from January’s 0.3% gain, fueled by robust motor vehicle production.
- Housing data was mixed in February. Building Permits dropped 1.2%, declining from 1.473 million to 1.456 million. Housing Starts jumped 11.2%, rising from 1.35 million to 1.501 million, indicating strength in construction activity.
- Money market has priced in 61 basis points of easing by the Fed in 2025, which has sent US Treasury yields plunging alongside the American Currency.
XAU/USD technical outlook: Gold price conquers $3,000 and is set to end above that level
Gold price is upward biased, poised to challenge higher prices above the current YTD high of $3,038. If buyers clear the latter, they could test $3,050 and $3,100 figures. It’s worth noting that the Relative Strength Index (RSI) is overbought. But the strength of the trend hints that the “most extreme” reading would be 80; hence XAU/USD could continue to trend higher.
Conversely, if Bullion drops below $3,000, the first support would be the February 20 daily high at $2,954, followed by the $2,900 mark.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.