Gold prices hit a record high as the trade war escalated, and the US dollar fell to its lowest point in 35 months.
Gold’s price rose for the third consecutive day on Friday, reaching a new all-time high of $3,245. It gained over 2% as the trade war between the US and China escalated, affecting the global economy. At that moment, XAU/USD was trading at $3,233.
During the North American session, China imposed 125% tariffs on US goods in response to President Donald Trump’s decision to raise duties on Chinese products to 145%. This led investors to seek safer options, driving up bullion prices. The US dollar weakened and dropped to a near three-year low, with the US Dollar Index (DXY) at 99.01.
The mixed data may stop the Fed from easing its policies because trade tariffs could lead to inflation. As a result, the Fed is likely waiting before making decisions. Traders are now expecting three interest rate cuts in 2025.
Forex market update:
Gold price surge, showing resilience despite rising US real yields.
The yield on the US 10-year Treasury climbed seven basis points to 4.495%, while real yields increased by seven and a half basis points to 2.307%. This indicates that yields on US Treasury Inflation-Protected Securities were insufficient to restrain Gold prices.
In April, the University of Michigan’s Consumer Sentiment Index dropped significantly from 57.0 to 50.8, reflecting rising household pessimism. Inflation expectations also surged, with the one-year outlook jumping to 6.7% from 5% and the five-year forecast increasing from 4.1% to 4.4%.
The March US Producer Price Index (PPI) fell to 2.7% year-over-year, down from 3.2% and below the 3.3% forecast, suggesting easing input cost pressures. However, core PPI, excluding food and energy, remained above 3% at 3.3% YoY, down from 3.5% in February.
On Friday, several US banks, including Wells Fargo and Morgan Stanley, represented by CEO Ted Pick, noted increased recession fears. JPMorgan CEO Jamie Dimon cited a 50% chance of a US recession. Goldman Sachs raised the recession odds from 35% to 45% over the next year.
Gold price has reached new record highs, surpassing $3,100 and $3,200.
The price of gold is still rising, with buyers looking at the $3,250 level. If it breaks the current all-time high of $3,245, it could move toward that $3,250 mark. If both levels are surpassed, the next target will be $3,300.
On the other hand, if XAU/USD falls below $3,200, the first support level will be the April 10 high of $3,176. If that level is broken, the next target will be $3,100.
The US Dollar is falling as confidence in the economy wanes and concerns about rising inflation grow.
The US Dollar Index (DXY) dropped in Friday’s trading, nearing the 100 mark after reaching a three-year low earlier in the day. This decline indicates a decline in investor confidence, as recent data and central bank comments suggest a troubling outlook for the US economy.
The University of Michigan’s sentiment index fell sharply in April, and the Producer Price Index missed expectations, raising concerns about disinflation. Federal Reserve officials have also noted rising inflation expectations as a risk despite signals of softening demand. Overall, the technical outlook remains bearish as the DXY continues to decline.
US Dollar Drops on consumer gloom and tariff fallout
- The University of Michigan’s sentiment gauge dropped to 50.8 in April, while inflation expectations surged to 6.7% for the one-year view.
- New York Fed President Williams and Boston Fed President Collins warned of rising trade-related inflation risks and a likely downturn in growth.
- The US Producer Price Index rose 2.7% year-over-year in March, down from February’s 3.2%, while the core rate slowed to 3.3%.
- Unemployment claims increased to 223K, with continuing claims falling to 1.85M, signaling mixed labor dynamics.
- China confirmed retaliatory tariffs on US imports, matching Washington’s hike to 125% and reviving recession concerns globally.
USD Technical analysis
The US Dollar Index remains bearish, trading around the 100 area. The MACD signals a sell, while the RSI is at 29.37, indicating weak momentum without being oversold. Momentum (10) is at -3.303, suggesting further downside risk. The 20-day, 100-day, and 200-day moving averages show selling pressure. Resistance levels are 102.29, 102.72, and 102.89, with no significant support below the current range, indicating that the DXY’s decline may continue.
Cryptocurrency Market Update:
Bitcoin and the cryptocurrency market recovered, as statements from Fed officials indicated that the agency is ready to stabilize the market if needed.
Boston Fed President Susan Collins said the agency will use tools to stabilize the market if liquidity issues arise. Following her comments and lower-than-expected PPI data, Bitcoin rose to $83,000 on Thursday, while Ethereum, XRP, and Solana also gained. By Friday, Bitcoin increased by 5%, trading just below $84,000, as Collins indicated that the Fed could act to stabilize markets if needed.
Bitcoin and crypto reverse losses as Fed officials hint at the agency’s intervention.
In an interview with the Financial Times, Collins indicated that the Fed is ready to utilize various tools to stabilize the market amid rising liquidity concerns beyond changing interest rates. Her comments come as uncertainty grows in the bond market, with the yield on the 10-year Treasury Note nearing 4.5%. The Fed previously intervened in 2020 during the pandemic by purchasing government bonds, which positively affected Bitcoin, leading to significant price increases afterward. Following Collins’ remarks, Bitcoin surged 5% to nearly $84,000, positively impacting other cryptocurrencies. The Producer Price Index also fell by 0.4%, its most significant decrease since October 2023, coinciding with lower-than-expected Consumer Price Index data.
President Trump’s meme coin leads crypto unlock with an incoming supply pressure of over $320 million.
Official Trump (TRUMP), launched by President Trump, is set to unlock $321.6 million in tokens for team members next week, even with ongoing risk-averse sentiment in the crypto market.
This unlock could exacerbate the token’s decline, as new supply often leads to price drops.
TRUMP holders have already faced significant losses; after peaking at $73.43 on January 19, the token is now trading around $8.05, down 89% since then, according to CoinGecko.
The upcoming unlock of 40 million TRUMP may worsen its decline, raising the circulating supply to about 240 million and risking further drops. TRUMP has fallen 89% since its peak of $73.43 in January and is now trading around $8.05.
This decline reflects the broader meme coin market, which has recently shrunk from $127.26 billion to $45.64 billion. In addition to TRUMP, Fast Token (FTN) and Arbitrum (ARB) will also see significant supply unlocks next week.
Summary
The global economy faces various challenges that impact gold and cryptocurrencies. Ongoing US-China trade tensions drive investors to gold, pushing its prices higher. Meanwhile, a weakening US dollar adds to economic uncertainty, while fluctuating market sentiment and potential regulatory actions influence cryptocurrency values. Investors will likely remain cautious, balancing opportunities and risks in this volatile environment.
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