Gold prices continue their historic rally, surpassing the $3,100 mark for the first time. Heightened fears of a potential global trade war and the specter of stagflation in the United States have led to a surge in demand for the precious metal as a safe-haven asset.
A recent report from the Wall Street Journal (WSJ) highlighted that U.S. President Donald Trump may escalate trade tensions by imposing higher and more expansive reciprocal tariffs on U.S. trading partners, set to take effect on April 2. This development is expected to trigger another wave of risk aversion in global markets.
“Advisers have considered imposing global tariffs of up to 20%, which would affect nearly all of the U.S.’s trading partners,” the WSJ report stated.
Markets are currently in a ‘sell everything’ mode, with growing concerns over a widespread tit-for-tat tariff war. Such a scenario could exacerbate inflationary pressures while also stifling global economic activity. In times of market uncertainty, investors typically turn to gold as the ultimate store of value, further driving up its price.
The U.S. Dollar (USD) and U.S. Treasury bond yields are suffering from mounting fears of stagflation, further fueling gold’s rally to new highs.
However, questions remain about whether the current uptrend in gold prices can be sustained. Traders may engage in profit-taking ahead of Trump’s upcoming tariff announcements on April 2, which could bring temporary volatility to the gold market.
From a technical perspective, the gold price is at risk of a correction, as the daily Relative Strength Index (RSI) has reached an extremely overbought zone, currently nearing 76. This suggests that the market may be due for a pullback before the next leg of the rally can unfold. Traders are likely to keep an eye on this technical indicator as a potential signal for a short-term reversal.