GOLD Analysis
Gold Rebounds to $3,350 on Tariff Escalation and Intensifying Geopolitical Risks
Highlights
- Trump’s 50% steel and aluminum tariff hike reignites global trade fears, driving gold above $3,350/oz as investors seek safety.
- Ukrainian drone strike on Russian aircraft and subsequent missile reprisals ahead of Istanbul peace talks amplify geopolitical risk, strengthening gold’s safe-haven appeal.
- Key manufacturing indicators from Germany and the U.S. this week will guide growth and inflation expectations, influencing gold’s next directional move.
Overview:
Gold prices have surged past $3,350 per ounce, settling around $3,245 (current market price) as a confluence of trade-policy shocks and geopolitical escalations drove investors back into the safe-haven metal. On the trade front, President Trump’s announcement of a 50% tariff increase on steel and aluminum imports, set to take effect on June 4, reignited fears of a broader global trade escalation. The administration’s decision explicitly targeted China, which the White House accused of reneging on a recent tariff truce—an assertion that Beijing has strongly denied. Although the new tariffs are set to be contested in the courts, the immediate market reaction underscored how quickly headline risks can reshape risk sentiment, sending equities lower and gold sharply higher in response to renewed uncertainty over global supply chains and growth prospects.
Concurrently, tensions in Eastern Europe have escalated. Reports indicate that a Ukrainian drone strike destroyed over 40 Russian military aircraft, prompting a forceful Russian missile retaliation in the run-up to peace talks in Istanbul. This exchange marked one of the most significant direct attacks on Russian assets since the war in Ukraine began, raising the specter of the conflict widening or intensifying. Investors, already skittish from trade-policy developments, responded by bolstering their gold holdings, positioning the metal as a hedge against the possibility of a broader geopolitical conflagration.
Adding to the metal’s bullish backdrop, the Federal Reserve’s recent messaging has left the door ajar for future policymakers to tailor monetary policy to evolving risks. While U.S. inflation remains above the Fed’s 2% target, the central bank’s leadership continues to monitor both growth and labor-market metrics closely. In this environment, gold’s zero-yield nature becomes more attractive, particularly when nominal yields are constrained by geopolitical and trade-policy uncertainties.
Beyond these headline drivers, underlying structural demand for gold—particularly from Asia—remains robust. Major physical consumers, notably China and India, continue to absorb significant volumes, both through private-sector offtake and central-bank purchases. In April, official data showed Chinese gold imports climbing sharply under a renewed import-quota allocation, while central banks from emerging markets have been net buyers for the past several quarters. This foundation of demand helps to underpin gold’s price floor even when safe-haven flows ebb temporarily.
Looking ahead, market participants will be watching several high-impact manufacturing surveys. In the Euro Zone, Germany’s final Manufacturing PMI will offer insight into the bloc’s industrial health and its ability to withstand protracted trade tensions. From the United States, the final Manufacturing PMI, the ISM Manufacturing PMI, and the ISM Manufacturing Prices Index will provide key gauge points on U.S. production, input costs, and price pressures. Taken collectively, these data will inform broader expectations for global growth, inflation trajectories, and central-bank policy paths—all crucial inputs for gold’s next directional move.
Technical Levels and Strategy
- Current Market Price (CMP): $3,345/oz
- Immediate Support: $3,317 (1st Support)
- Immediate Resistance: $3,358 (recent overnight high and psychological cap)
Trading Strategy: Given today’s pullback from overnight peaks, a buy-on-dips approach is recommended. Traders can consider initiating long positions above $3,368, targeting $3,420–with a protective stop-loss below $3,340. Alternate Scenario: If high rejects, one can take sell from 3360 for targeting 3330-3317 with stoploss above 3370 This risk-management framework allows participants to participate in the ongoing safe-haven rally while containing downside in the event of a sudden reversal—either from a successful tariff challenge in the courts or de-escalation in Ukraine.
Overall, gold’s breach of the $3,300 level for the first time in recent weeks reflects a pronounced flight to safety. With global trade anxieties resurfacing and the possibility of a broader conflagration in Eastern Europe, gold remains one of the most sought-after hedges against an increasingly unpredictable macro backdrop