Gold prices fell to a seven-day low of $3,015 before recovering slightly to $3,029, a decline of 2.70%. This drop followed comments by Federal Reserve Chair Jerome Powell about inflation potentially rising due to tariffs amid ongoing trade tensions between the US and China.
Powell’s remarks dampened expectations for interest rate cuts, indicating risks to US economic growth. Margin calls disproportionately affected hedge funds following recent market movements. The US added over 200,000 jobs in March, although the unemployment rate edged up to 4.2%.
Factors Influencing Gold Prices
Gold’s value is influenced by factors like geopolitical instability and interest rates. A strong US Dollar typically depresses Gold prices, while a weaker Dollar supports increases. Central banks have significantly increased their Gold reserves, purchasing 1,136 tonnes in 2022, which is the highest recorded.
Technical indicators suggest Gold could face further challenges, particularly if it closes below $3,000, with next support levels at $2,937 and $2,900. Conversely, reclaiming $3,100 could shift momentum back to buyers.
The recent decline in the price of gold to $3,015, before a minor rebound to $3,029, amounts to a steep 2.7% pullback—tracing back to a very specific catalyst. An offhand but impactful observation from Powell, suggesting inflation may edge upward due to tariffs amid souring relations between Washington and Beijing, seemed to change the sentiment decisively. The implication here is fairly straightforward: if inflation sticks, the Federal Reserve looks less likely to cut rates in the near term. Any hint of higher borrowing costs puts pressure on non-yielding assets, which is partly why gold slid so sharply.
When Powell hinted that trade policy might stoke consumer prices, the message wasn’t just about tariffs. Traders interpreted it as the Fed distancing itself, at least somewhat, from the path toward easing monetary policy. In the world we navigate, where rates are as much about expectations as reality, that sort of shift can lead to broad repricing. It’s no coincidence that open positions facing elevated margin pressures—namely from hedge funds—came under stress at the same time. Liquidations tend to cascade when there’s a break from prevailing assumptions.
Employment Data and Its Implications
To add weight to the current state of play, the March employment data showed strong payroll growth at over 200,000 new jobs. Yet, even as hiring remained robust, the unemployment rate ticked up slightly—now at 4.2%. This creates a mixed outlook. While job growth supports consumption, the rise in joblessness leaves room for dovish interpretation. We view this as a trap for overly bullish gold positions. Resilience in the dollar, spurred by the idea that interest rates will stay higher for longer, keeps pressure on the yellow metal regardless of physical demand.
It’s also worth remembering that gold doesn’t sit in a vacuum. Global monetary authorities—particularly in emerging markets—have continued topping up their reserves at a record pace. That’s typically seen as a bullish backdrop, especially when combined with visible geopolitical risk. A year ago, central banks brought in over 1,100 tonnes, the most on record. That kind of buying usually sets a floor. Still, it hasn’t been enough to counterbalance the rate-driven strength in the greenback these past few weeks.
Technically, the chart paints a potentially uncomfortable path ahead depending on where prices land. A weekly close below $3,000 doesn’t just represent a round number breach—it opens room down to the lower supports at $2,937, and then again at $2,900. On the flip side, if bulls can get traction and close above $3,100, it likely signals a return of buying conviction. We will be watching price action in this tight corridor very closely. A move outside of it probably draws volume, and that’s when volatility tends to spike.
Positioning into the next two weeks needs to be prepared for swings in either direction. While longer-term fundamentals maintain some appeal for metals, the short-term is highly reactive. We’re approaching levels that could trigger rapid directional trades, particularly in options and futures, as certain levels act as triggers for both stops and initiations. Waiting for clear confirmation at around $3,100 to re-enter long setups makes more sense than anticipating a reversal too early, especially with dollar strength persisting.
