Gold Dips on Profit-Taking
The gold (XAU/USD) price declined by 0.4% on Tuesday. The rally paused, and traders took profit on their long positions ahead of the very strong resistance at $3,150.
Still, the demand for safe-haven assets remains strong. Investors await US President Donald Trump’s announcement of tariffs on countries that have a trade imbalance with the US. The Washington Post reported on Tuesday that the White House has drafted plans for tariffs of around 20% on most US imports.
It’s "not surprising to see a little bit of profit-taking, particularly given that the market had become rather overbought. I don’t really see much of a change in the fundamentals, it’s a perfect storm for gold", said Peter Grant, vice president and senior metals strategist at Zaner Metals.
Goldman Sachs, a major US investment bank, raised the probability of a US recession from 20% towards 35% and said it expected more rate cuts by the Federal Reserve (Fed). Gold, which is considered a hedge against geopolitical and economic uncertainties, performs well in a low-interest environment.
"We continue to see the gold prices moving higher, due in part to increasing gold holdings by physically backed ETFs (exchange-traded funds) and robust central bank purchases", said Ryan McIntyre, senior portfolio manager at Sprott Asset Management.
XAU/USD rose during the Asian session but lost most of its gains during the early European trading hours. The ADP US Employment report, which is considered a proxy for Nonfarm Payroll (NFP) data, is due at 1:15 p.m. UTC today. It may trigger some volatility in all USD pairs. However, today’s most important event is Donald Trump’s press conference about tariff policies at 8:00 p.m. UTC.
"Spot gold still targets a range of $3,153 to $3,163 per ounce, as it has quickly recovered from the 1 April low of $3,107", said Reuters analyst Wang Tao.
Uncertainty Around Trade Tariffs Weighs Down on Euro
The euro (EUR/USD) lost 0.22% against the US dollar (USD) on Tuesday after the latest US macro statistics painted a rather mixed picture of the US economy. Meanwhile, the eurozone Consumer Price Index (CPI) report largely aligned with the expectations.
According to the S&P Global survey, US manufacturing activity contracted in March after two consecutive months of expansion. The survey also showed the highest inflation in nearly three years, suggesting that the Federal Reserve (Fed) may be unwilling to cut the rates soon. Investors are becoming increasingly concerned about rising prices, especially as it isn’t clear to what extent new trade tariffs will impact national inflation. Another report by the Labour Department showed a smaller-than-expected increase in job openings, suggesting that the economy was slowing.
"It is clear that the manufacturing sector is already bearing the brunt of President Trump’s protectionist policy changes—and that the rest of the economy could suffer the downstream consequences in the months ahead", said Karl Schamotta, chief market strategist at Corpay.
Meanwhile, Ursula von der Leyen, the European Commission President, said that the European Union (EU) is open to negotiations with the US on trade tariffs but would retaliate strongly if necessary. According to Reuters, investors have boosted their bets on rate cuts by the European Central Bank (ECB) due to tariff fears and weak economic data. These factors drive lower bond yields and the euro.
EUR/USD fell slightly during the Asian and early European trading sessions. The ADP US Employment report—a proxy for Friday’s Nonfarm Payroll (NFP) data—will be released at 1:15 p.m. UTC later today. The data may trigger some volatility in all USD pairs. However, all eyes will be on Donald Trump’s press conference about tariff policies, which is scheduled for 8:00 p.m. UTC. If he talks about new planned tariffs on EU goods, EUR/USD will likely weaken. Conversely, a more conciliatory tone may push the pair higher. Key levels to watch are resistance at 1.08220 and support at 1.07510.
Japanese Yen Benefits from Weakening US Dollar
The Japanese yen (USD/JPY) gained 0.23% against the US dollar (USD) on Tuesday due to the weakening US manufacturing sector and the labour market.
According to Reuters, investors see the Japanese currency as a safer asset than the US dollar in the current environment, as US tariffs would likely hurt the US economy. Unsurprisingly, USD/JPY has been in a strong bearish trend since mid-January.
"With deeply contradictory narratives emerging around the scope, scale, and duration of the administration’s proposed trade measures, investors are trimming risk across the currency markets and waiting for the details to emerge", said Karl Schamotta, chief market strategist at Corpay.
Bank of Japan (BoJ) Governor Kazuo Ueda said planned US tariffs could greatly impact world trade. Analysts say the influence of US tariffs on Japan’s economy will be key to how soon the BoJ raises interest rates. The bank’s next meeting will be at the end of the month, from 30 April to 1 May. A Reuters poll showed that many analysts expect the BoJ to deliver its next rate hike in Q3, probably in July.
USD/JPY rose during the Asian and early European trading sessions. Today, the ADP US Employment report will be released at 1:15 p.m. UTC, potentially triggering volatility in the market. Traders should closely monitor today’s Donald Trump press conference about tariff policies at 8:00 p.m. UTC. If he announces plans to impose more tariffs, USD/JPY will likely weaken. Otherwise, USD/JPY may rally. Key levels to watch are resistance at 150.800 and support at 149.020.
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