Gold prices fell more than 3% this week, reaching $2,845, as the US Dollar rose to a 10-day high of 107.66 on concerns about increasing trade policy risks and recession. The market responded violently to US President Donald Trump’s confirmation of 25% tariffs on Canada and Mexico, as well as the expectation of a 70-basis-point Federal Reserve rate cut in 2025 with the first cut expected in June. The Federal Reserve’s favored inflation measure, the Core PCE Price Index, also indicated that progress toward the 2% inflation goal was being made, further stoking speculation of monetary ease. At the same time, the US 10-year Treasury yield dropped modestly, underpinning the USD rally, and traders took profits before the weekend. In spite of the recent bearish pressure, Goldman Sachs kept its medium-term bullish call, predicting the price of gold to hit $3,100 by the last quarter of 2025.
KEY LOOKOUTS
• The US Dollar rallied in light of increasing trade tensions, as Trump levied 25% tariffs on Mexico and Canada, triggering market anxiety and recession jitters.
• Markets expect a 70-bps Fed rate cut in 2025, with the initial cut expected in June, which may affect gold prices and investor attitudes.
• XAU/USD has critical support at $2,800 and resistance at $2,900, with bearish momentum ongoing as traders take profits and rebalance portfolios.
• In spite of short-term declines, Goldman Sachs remains optimistic, forecasting gold prices to touch $3,100 by 2025-end.
Gold prices have come under heavy pressure, falling more than 3% this week as the US Dollar gained strength in the face of increasing trade tensions and recession concerns. President Trump’s announcement of 25% tariffs on Mexico and Canada and another 10% on China has created market uncertainty, pushing investors towards the USD. Meanwhile, expectations of a 70-basis-point Federal Reserve rate cut in 2025, with the first cut anticipated in June, have further influenced market sentiment. The Federal Reserve’s Core PCE Price Index signaled steady progress toward the 2% inflation target, reinforcing speculation of policy easing. Technically, XAU/USD struggles below $2,850, with key support at $2,800 and resistance at $2,900. In spite of the recent decline, Goldman Sachs is still optimistic about the long-term prospects, predicting gold prices to reach $3,100 by the end of 2025.
Gold prices dived more than 3% this week as the US Dollar rallied in the face of trade policy worries and recession risk. Trump’s imposition of 25% tariffs on Mexico and Canada heightened market uncertainty, and the prospect of a 70-bps Fed rate cut in 2025 contributed to volatility. In the short term, Goldman Sachs remains optimistic, predicting gold to hit $3,100 by the close of 2025.
• XAU/USD dropped to $2,845 as the US Dollar gained strength due to trade tensions and recession fears.
• The US imposed 25% tariffs on Mexico and Canada and another 10% on China, creating uncertainty.
• The US Dollar Index (DXY) reached 107.66, putting pressure on gold prices and drawing investors due to economic worries.
• Markets are expecting a 70-bps Fed rate cut in 2025, starting with the June cut, guiding gold’s movement.
• The 10-year Treasury note yield fell modestly, driven by fears of economic slowdown and even monetary easing.
• Gold has resistance at $2,900 and support at $2,800, as bearish momentum continues in the short term.
• In spite of recent setbacks, Goldman Sachs predicts gold at $3,100 by the end of 2025, holding an upbeat long-term estimate.
Gold prices came under heavy pressure this week as global economic issues and policy announcements influenced market sentiment. The US Dollar rallied with increased trade tensions, with President Trump affirming 25% tariffs on Mexican and Canadian imports, as well as an extra 10% on Chinese imports. These policies have contributed to economic uncertainty worldwide, causing investors to flock to safe-haven assets and review their portfolios. The Federal Reserve’s favorite inflation measure, the Core PCE Price Index, also showed consistent advancement toward the 2% goal, supporting expectations of monetary policy loosening in the months ahead.
XAU/USD Daily Price Chart
Chart Source: TradingView
In the meantime, market attention is on the Federal Reserve’s interest rate strategy, with investors expecting a 70-basis-point rate cut in 2025 and the initial cut expected in June. As growth forecasts for the economy change, worries about a possible recession continue to guide investments. The Atlanta Fed’s most recent GDPNow estimate is an indicator that the US economy is going into contraction, fueling speculation for future policy action. In the midst of these developments, financial markets across the globe are on tenterhooks, with investors keenly watching economic signals and policy initiatives that may impact financial markets over the coming months.
TECHNICAL ANALYSIS
Precious gold prices have shown a bearish trend, posting consecutive losses as investors take profits and rebalance portfolios. XAU/USD was unable to sustain above the $2,850 level after dipping from its high point of $2,885, with major support at $2,800. A fall below this level would reveal further downside to the October 31 high at $2,790 and the 50-day Simple Moving Average (SMA) at $2,770. Support on the upside is at $2,900, then the year-to-date high of $2,956. The US 10-year Treasury yield at 4.229% has so far capped bullion’s rally, with falling real yields presenting ambivalent cues for gold’s next direction. With sustained market volatility, investors are on guard, weighing whether gold can stabilize or continue to lose ground.
FORECAST
Gold prices can expect bullish pressure in the next few months if market fears continue to fuel demand for safe-haven assets. The Federal Reserve’s planned rate cuts in 2025, with the first decrease scheduled for June, will weaken the US Dollar, making gold more desirable to investors. Furthermore, should inflationary forces continue or there is a ratcheting of geopolitical tensions, gold may turn stronger again with possible resistance areas at $2,900 and the year-high of $2,956. Long-term views, like that of Goldman Sachs’ expectation that gold will trade at $3,100 through the end of 2025, suggest the metal will be able to make up lost ground if economic sentiment is in its favor for turning investment trends around.
On the negative side, gold is still exposed to a strong US Dollar and monetary policy changes. If economic indicators favor a strong US economy, the Federal Reserve can slow down or limit the extent of rate cuts, capping gold’s potential upside. The imposition of 25% tariffs on Mexico and Canada and further tariffs on China can also push investors into the USD, exerting downward pressure on gold prices. If XAU/USD cannot maintain important support at $2,800, further losses towards $2,770 and $2,750 are possible. Short-term volatility is anticipated, with price action influenced mainly by inflation figures, Federal Reserve policy indications, and international trade developments.
