By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
Gold has seen a sharp runup, mostly due to worries about the possible economic effects of President Trump’s enacted tariff measures. A correction may be imminent, according to recent price behaviour following an impressive gain.
Extraordinary gold rally
Gold prices have been rising since December 18, which is a result of multiple concurrent worries. The execution of Trump’s tariff policies, inflation pressures, the expanding U.S. fiscal debt, and geopolitical concerns in the Middle East and Ukraine have all influenced market movement. Due to these factors, gold futures have risen by an astounding 17% this month, from about $2620 to $3065.
FED lowers growth forecasts
In last week’s FED meeting, the Fed did not change interest rates, but it did cut its GDP growth prediction from 2.1% to 1.7% and increase its inflation forecast from 2.5% to 2.7%, indicating a greater impact of tariffs. Whether this means higher or lower interest rates than would otherwise be the case depends on whether tariffs are expected to permanently raise inflation rather than just produce a one-time price hike.
Rate cutting cycle to continue in 2025
The Bank of England, like the Fed, maintained interest rates constant while suggesting that it saw potential for future reduction. China released data for January and February (at the same time due to the Chinese New Year break), with positive surprises in retail and home sales but a persistent decrease in house prices. The government places a high premium on increasing consumer spending, and housing market stability is viewed as a necessary condition for this.
Trump tariff worries continue.
Investors are concerned about US President Donald Trump’s promised reciprocal tariffs, which he has stated will go into force on April 2. This is in addition to the flat 25% duty on steel and aluminium that has been in place since February. US Senator Steve Daines will travel to China for trade discussions, the first high-level political encounter since President Donald Trump’s return, to restart stalled trade negotiations amid escalating tariff tensions.
Geopolitical Tensions persists
Both Russia and Ukraine increased aerial attacks on Thursday amid truce talks, with Ukraine sending attack drones to target Russia’s Engels airfield in the Saratov region, resulting in a fire and explosions. Furthermore, the Ukrainian Air Force said on Thursday that Russia had launched 171 drones over its territory. Meanwhile, Russian and US officials are set to have discussions on Ukraine in Saudi Arabia on Monday. Israel began heavy bombings over Gaza on Tuesday, shattering a cease-fire with Hamas that had been in effect since late January. Furthermore, Hamas fired three missiles at Israel on Thursday, causing no casualties.
Gold after achieving the $3000 (~Rs 88000) milestone, and extending the rally to $3065 (Rs 89800), Gold is feeling the exhaustion now. It seems prices are topping out in the short term, we could see profit booking and price retracement at these levels.
Gold Apr Futures Daily Chart
Technically, the correction over the past two days could be linked to profit-taking under somewhat overbought conditions on daily charts. However, the lack of follow-through selling should cause bearish traders to exercise care before concluding that the gold price has peaked in the near term.
Using Fibonacci retracement analysis from the recent low of $2845 to the high of $3065 several key support levels emerge. The first level to watch is the 23.6% retracement which occurs at $3012 (~Rs 87500). The next level is the 38.2% retracement at $2980 (~Rs 86600), followed by the 50% retracement at $2955 (~Rs 85850).
For investors with a longer time horizon, such pullbacks may offer strategic chances as they are common in longer-term bull markets.
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