Gold Dips on Profit-Taking After a Rally
The gold ( XAU/USD ) price dropped 0.83% on Monday. Investors took profit on their long positions after bullion reached a record high during the previous trading session.
Risk sentiment has improved somewhat as US President Donald Trump’s administration exempted smartphones, computers, and some other electronics from increased tariffs. Most of these goods are imported from China, so the decision gives investors hope that trade tensions may subside soon. In a statement, the Chinese Ministry of Commerce called the move a ’small step by the US to correct its wrong practice of unilateral reciprocal tariffs’.
"Perhaps some relief on the tariff front, with the exemption of some electronics maybe taking some of the safe haven bid out. However, ongoing uncertainty about trade and tariffs, weakness in the US dollar and softer yields tend to be supportive for gold", said Peter Grant, vice president and senior metals strategist at Zaner Metals.
Indeed, Trump said he would announce the tariff rate on imported semiconductors later this week, keeping market participants on edge.
Over the past month, the traditional role of gold as a hedge against geopolitical and economic uncertainty has been reinforced by the US-China trade war. These tensions prompted investors to buy the metal amidst global market unease. Goldman Sachs, a US investment bank, remained the most bullish major bank on gold. It raised its year-end forecast towards $3,700, citing stronger-than-expected central bank demand and heightened recession risks affecting exchange-traded funds (ETFs) inflows. According to the World Gold Council, gold ETFs in China increased by 29.1 metric tons in the first eleven days of April, more than during Q1.
XAU/USD rose during the Asian and early European trading sessions. Today, the market focuses on any tariff-related news that may signal shifts in global trade dynamics and impact market sentiment. Also, the US Empire State Manufacturing Index report will come out at 12:30 p.m. UTC and may add more volatility to all USD pairs.
"Spot gold may break resistance at $3,240 per ounce and rise to $3,304", said Reuters analyst Wang Tao.
Euro Pulls Back From a Strong Resistance
The euro ( EUR/USD ) lost 0.1% against the US dollar (USD) on Monday. The resistance around 1.14200 was a significant barrier for further upward momentum.
The US Dollar Index (DXY) stabilised just below the 100.000 mark as investors struggled to digest the back-and-forth changes on US tariffs. Still, currency markets were calmer yesterday as risk sentiment improved after the White House excluded certain electronics goods from tariffs. Still, US President Donald Trump’s latest comments about possible semiconductor tariffs suggest the reprieve will only last a short time. Overall, the brewing trade war has sowed confusion among investors, adding to the geopolitical uncertainty worldwide. Kieran Williams, head of Asia FX at InTouch Capital Markets, said the policy confusion and erosion in investor confidence are fuelling a slow but steady rotation out of US dollar assets.
Meanwhile, Federal Reserve (Fed) Governor Christopher Waller warned that trade tariffs form a substantial economic shock. He added that tariffs could necessitate radical rate cuts to avert a recession, even amidst persistent high inflation . Traders are now pricing in a 30% chance of one percentage point rate reduction by the Fed by the end of the year. At the same time, investors don’t expect the European Central Bank ( ECB ) to be particularly hawkish either. The lack of divergence in monetary policy expectations suggests that the recent rally in EUR/USD is primarily based on USD weakness as investors flocked into the safety of the Swiss Franc (CHF) and the Japanese Yen (JPY). Thus, the euro seems to lack fundamental impulses to continue its rise.
EUR/USD remained relatively unchanged during the Asian and early European trading sessions. Traders continue to focus on any tariff-related announcements that may change the global trade dynamic and affect investors’ confidence. Today’s German ZEW Economic Sentiment report at 9:00 a.m. UTC may add more volatility to all EUR pairs. Key levels to watch are resistance at 1.14175 and support at 1.12890.
CAD Traders Await CPI Report and Rate Decision
The Canadian dollar ( USD/CAD ) remained essentially unchanged against the US dollar (USD) on Monday. Traders rested after a period of significant volatility, awaiting fresh economic data.
USD/CAD has declined by more than 6% from its latest peak on 6 February. The decline can be attributed to a confluence of factors. Despite trade tariffs on certain Canadian goods, the absence of new impositions allowed investors to largely factor them into assessments, diminishing their immediate impact on market sentiment. Trade tariffs actually began to negatively impact investors’ perceptions of the US economy’s prospects, casting a shadow over its future growth potential.
The Federal Reserve’s (Fed) increasingly dovish stance, signalling a quicker interest rate reduction than anticipated, added further downward pressure to the pair. This contrasts with the Bank of Canada’s ( BoC ) monetary policy stance. The bank is expected to deliver only 50 basis points (bps) worth of rate cuts in 2025. However, growing recession risks will likely force the BoC to implement another two rate cuts this year, which may exert upward pressure on USD/CAD.
USD/CAD remained relatively unchanged during the Asian and early European trading sessions. Today’s focus is on tariff-related news that may signal shifts in global trade dynamics and affect market sentiment. CAD traders may avoid opening large orders ahead of today’s Consumer Price Index ( CPI ) report, due at 12:30 p.m. UTC. In addition, the BoC interest rate decision is on Wednesday, which may add extra volatility to all CAD pairs. A majority of economists expect policymakers to leave the benchmark rate unchanged at 2.75%. However, any new details from the post-meeting statement or statements made during the press conference may surprise the market. Key levels to watch are resistance at 1.39100 and support at 1.38280.