Gold prices gain as Trump tariffs, dollar weakness, and rate cut expectations fuel rally

Gold prices surge as Trump tariffs, dollar weakness, and rate cut expectations fuel rally

Gold prices have started to renew gains as investors flocked to the safe-haven asset following the implementation of President Donald Trump's "reciprocal" tariffs. The precious metal's appeal was further enhanced by a weakening U.S. dollar and growing expectations for Federal Reserve interest rate cuts in 2025.

Trade war concerns drive safe-haven demand

Trump's tariffs, which included a substantial 104% duty on Chinese goods, came into effect at 0401 GMT on Wednesday. These measures have intensified concerns about a potential global trade war and recession, creating the perfect environment for gold to thrive.

China has already announced plans for a high-level meeting to formulate its response to the tariffs. Additionally, China's central bank has instructed state lenders to reduce their dollar purchases, potentially further weakening the U.S. currency.

"Trade war concerns are weighing on the prospects of the U.S. economy. Market participants are starting to price in several rate cuts by the U.S. Fed this year," market analysts noted, highlighting factors supporting gold's upward trajectory.

Dollar weakness makes gold more attractive

The U.S. dollar index weakness is making dollar-denominated gold more affordable for buyers using other currencies. This relationship between dollar weakness and gold strength has been a consistent pattern in the precious metals market.

As international tensions rise and the dollar faces pressure, gold becomes increasingly attractive to global investors seeking stability in uncertain times.

ETF inflows signal strong institutional confidence

According to World Gold Council data, gold-backed exchange-traded funds registered their largest quarterly inflow in three years during January-March 2025. This substantial institutional investment provides a strong foundation for continued price appreciation.

The combination of retail and institutional demand creates a powerful momentum for gold prices, with both segments of the market moving in the same direction.

Analyst forecasts paint bullish picture for gold in 2025

Leading financial institutions have released increasingly optimistic forecasts for gold through 2025:

• HSBC predicts an average gold price of $3,015 per ounce, citing geopolitical risks and interest rate expectations

• Bank of America forecasts gold reaching $3,063 per ounce, driven by the fragile global trade landscape

• Standard Chartered expects gold to peak at $3,300 per ounce in Q2 2025

• Citigroup sees gold touching $3,000 in the next 6-18 months

• Goldman Sachs predicts gold rising to $3,100 per ounce by year-end, with potential to reach $3,300

• Deutsche Bank has raised its forecast to $3,139 per ounce

• The LBMA Survey shows analysts forecasting an average price range between $2,250 and $3,290, with an average of $2,736

Why gold thrives in today's economic environment

Gold's performance in 2025 is being driven by its traditional role as a safe-haven asset during times of economic uncertainty and geopolitical tensions. The metal typically increases in value when:

1. Economic uncertainty rises - The escalation of trade tensions has heightened recession fears

2. Risk appetite decreases - Investors are shifting from riskier assets to safer options like gold

3. Currency values fluctuate - Dollar weakness makes gold more attractive globally

4. Interest rates fall - Lower rates reduce the opportunity cost of holding non-yielding assets like gold

5. Central banks diversify reserves - Rising central bank demand supports price growth

Outlook for gold investors

With inflation concerns, geopolitical tensions, and expectations of monetary policy easing, gold offers both portfolio diversification and potential appreciation.

As trade tensions between the U.S. and China continue to develop and markets adjust to the new tariff environment, gold could remain an attractive option for investors seeking stability amid uncertainty.

Gold – technical view

The price has now found interim support at the 2955 level and is oversold at current levels. A positive close on today’s candle confirms a bullish price reversal, implying that the short term uptrend is now resuming in line with the longer term uptrend.

In this scenario, 3170 becomes the initial upside target from the move, while a close below the 2955 level might be used as a stop loss consideration. A break above the 3275 level might suggest overhead trend line resistance at 3275 as a further resistance target from the move.