Gold prices briefly dipped below $3,000 on Monday but were attempting to recover towards $3,040. As of the latest update, the price was around $3,025, after a 2% decline, influenced by tensions from the ongoing trade war.
In response to the trade conflict, China has imposed retaliatory tariffs, prompting market uncertainty. This week’s focus will shift to US inflation data, with traders anticipating possible interest rate cuts from the Federal Reserve.
Fed Rate Cut Speculation
Currently, the FedWatch tool indicates a 49.3% chance for a rate cut in May. China’s central bank, the PBOC, has continued purchasing gold, adding reserves for five consecutive months, amid rising global trade tensions.
In technical terms, gold faces resistance at the $3,060 level, while pivotal support levels sit at $3,004 and below. A decline under $3,000 could see support at $2,955 and $2,942.
Tariffs are duties on imports intended to protect local manufacturers, distinguishable from taxes in how and when they are paid. President Trump plans to leverage tariffs, particularly targeting Mexico, China, and Canada, which represent a large portion of US imports.
Traders witnessed an early stumble in gold, as prices briefly broke below the $3,000 threshold to touch a low before clawing back to hover just above $3,020. That 2% slip at the start of the week didn’t happen in isolation—it came amid ripple effects from reignited tensions over tariffs. Beijing’s swift countermeasures appear to have rattled market confidence, especially with no clear resolution in sight for the ongoing economic disagreements with Washington. This has stirred volatility, particularly in commodities that tend to react strongly to uncertainty in global policy.
Impact Of US Protectionist Measures
Looking closer, the macro narrative now edges toward inflation data from the United States, with the potential for fresh policy direction from the Federal Reserve. The rate expectations are finely poised—neither clearly indicating action nor stability. With the probability for a cut sitting just shy of 50%, appetite for risk is being reassessed across asset classes. It’s not that the markets believe a cut is certain, but rather that such ambiguity has introduced hesitation. We’ve seen time and again that gold becomes a preferred shelter when any part of the rate picture becomes uncertain.
Meanwhile, reserve purchasing by China’s monetary authorities continues uninterrupted. Five straight months of gold accumulation by the PBOC reinforces the idea that there’s a strategic recalibration underway, likely aimed at reducing exposure to the greenback as diplomatic strains persist. It’s worth noting the effect this has had on supply confidence, which matters in any thinly stretched commodities market. Traders should remain alert to any sudden shifts in central bank behaviour globally—not just in Asia—as these moves can subtly shift demand expectations and influence pricing structures.
Technically, the ceiling for gold appears to be sitting just beneath $3,060. That level has provided a temporary cap on upward movement, while to the downside, $3,004 proved to be a cushion earlier in the week. But if that floor gives out, prospective support lines fall to $2,955 and $2,942—both zones where buying interest could reappear, depending on the flows. There’s history at those levels—it’s not arbitrary—so any dip toward them should be observed closely for signs of exhaustion among sellers.
It’s also not a coincidence that tariff activity has intensified ahead of a key data release out of the US. When Washington leans into protectionist measures, particularly toward trade partners with whom it has large deficits, ripple effects show up not just in terms of policy reaction but also in sentiment. Tariffs, being imposed at the point of import, act almost like a toll—raising costs without directly collecting money from consumers. The strategic intent has always been to create friction on inbound goods, in turn hoping to stimulate domestic production, but this gambit often comes at the cost of market stability.
For us, the key is in watching how these tensions seep into pricing structures and impact implied volatility. Any evidence that the rate outlook has shifted will need to be mapped quickly to options positioning. Those holding exposure in gold and related derivatives will want to be mindful of both headline risk and short-term technical markers, as sentiment can reverse quickly on either front.
