Gold Drops Below $2,920 as U.S. Tariffs and Yields Weigh on Demand
Gold prices declined on Wednesday as a firm U.S. dollar and rising Treasury yields dampened investor appetite for the non-yielding metal.
The benchmark 10-year Treasury yield edged higher, making gold less attractive compared to interest-bearing assets. Meanwhile, a mild rebound in the U.S. dollar further pressured gold, as a stronger dollar makes bullion more expensive for overseas buyers.
“The U.S. dollar strengthened following Trump’s address to Congress, taking some momentum away from gold,” said Tim Waterer, chief market analyst at KCM Trade. Despite this, Waterer noted that gold will likely remain in demand as trade tensions and economic uncertainty persist.
Trade Wars Escalate as U.S. Tariffs Take Effect
Markets reacted to new U.S. tariffs, which saw a 25% levy on Mexican and Canadian imports and a doubling of Chinese duties to 20%. These aggressive trade measures have raised concerns over potential economic slowdowns, which could have inflationary consequences.
China and Canada retaliated with their own tariffs on U.S. goods.
Mexico is expected to announce countermeasures by Sunday.
New York Fed President John Williams warned that these tariffs could drive inflation higher, though he maintained that current interest rates are appropriate.
Gold is traditionally seen as an inflation hedge, yet higher interest rates diminish its appeal, as investors flock to yield-generating assets instead.
Key Data to Watch: Jobs Report and China’s Stimulus
Traders are now shifting their attention to upcoming U.S. labor data, with the ADP employment report and nonfarm payrolls set to be released. These figures could provide further clarity on the Fed’s policy direction and impact gold’s trajectory.
Meanwhile, China has stepped up fiscal stimulus, aiming to bolster domestic consumption and sustain its 5% GDP growth target. If successful, stronger demand from the world’s top metals consumer could support gold prices in the longer term.
Gold Technical Analysis: Key Levels to Watch
Gold (XAU/USD) is currently trading at $2,920.88, showing signs of recovery after rebounding from a recent low of $2,835.10. However, the 50-day EMA at $2,901.36 is acting as a key support level, and a failure to hold above this could trigger fresh selling.
Immediate resistance: $2,937.13, with a stronger cap at $2,955.18.
Support levels: $2,905, with deeper support at $2,887 and $2,867.
Fibonacci levels: The 61.8% retracement at $2,887.63 is crucial for maintaining bullish momentum.
A breakout above $2,937 could pave the way for $2,972.63, while a drop below $2,905 may signal renewed bearish pressure. Gold’s trend remains bullish as long as key support levels hold, but investors should closely monitor macroeconomic factors driving price action.
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