The ongoing tariff conflict between the United States and China is expected to uphold gold’s reputation as a safe investment, keeping prices elevated even in light of some indications of improving relations between the two economic giants.
Additionally, anticipations surrounding potential monetary policy adjustments and rising geopolitical tensions in the Middle East will likely lend further support to the value of gold in the upcoming months.
After reaching a peak of $3,500 per ounce globally and Dh420 per gram in Dubai last week, gold experienced a slight decline over the weekend to $3,318.47 per ounce and Dh400 per gram.
Market analysts predict that gold could revisit the $3,450 mark if the prevailing economic and geopolitical instabilities persist.
“The friction between the US and China has escalated, particularly with news that China has canceled several orders for Boeing aircraft, citing a need to reassess its strategic priorities. While no official statement from Chinese authorities has been made, many analysts view this as an indirect form of economic retaliation, showing that Beijing has the capability to leverage its market influence against Washington,” remarked Linh Tran, a market analyst at xs.com.
The upward trend of gold was tempered after the US and China exempted certain items from tariffs amid the growing trade conflict.
On Friday, US President Donald Trump mentioned that discussions concerning tariffs with China are ongoing, while Beijing has denied any negotiations are taking place with the US.
China has allegedly warned that it will respond against any nation that collaborates with the US in ways that may threaten its interests.
“As the trade tensions between the US and China threaten to affect other nations, global investors are becoming increasingly cautious. In this environment, gold remains an attractive safe haven as capital flows out of stocks and other risky assets in search of safety,” she added.
Concerns Over US Economic Slowdown
Ahmad Assiri, a research strategist at Pepperstone, noted that while the market is seeking direction, increased selling could encounter technical support around the psychological benchmarks of $3,300 and $3,245.
“A strengthening dollar or rising US stock prices could challenge gold’s resilience, potentially leading to strategic profit-taking for long positions in gold during rallies,” he commented.
Assiri further highlighted that a significant factor sustaining gold’s value is the growing risk of a recession in the US over the next year, currently estimated at 52 percent.
“In an atmosphere where the possibility of a US recession could shift, and economic data guides market expectations, gold serves as a robust hedge against the risks associated with declining growth for both institutions and traders.”
Monetary Policy Adjustments Amid Regional Unrest
Beyond trade-related issues, Linh stressed that monetary policy remains a crucial element propelling gold’s upward trend.
“Recent indications of declining inflation have quickly altered expectations surrounding the Federal Reserve’s policy direction. The market now seems to favor the possibility of interest rate cuts starting in September, or even sooner, should economic data continue to weaken. In such circumstances, gold tends to perform well,” she remarked.
In his latest comments, Fed Chairman Jerome Powell adopted a cautious stance, recognizing strong retail sales in March but underscoring the fragility of economic growth. He reiterated the Fed’s readiness to act should more conclusive signs of slowdown emerge. These dovish signals have further reinforced the belief that a cycle of rate cuts is approaching—historically a bullish sign for gold.
“The combination of trade tensions, expectations of rate cuts, and geopolitical uncertainties has driven gold to its latest all-time high of nearly $3,385 per ounce. If no significant policy or economic shocks arise to disrupt this trend, and current drivers remain intact, gold may continue to ascend toward vital psychological levels like $3,400 and $3,450 in the near future.”