Gold may hit $3,000 an ounce in coming weeks on tariff uncertainty: Analyst

Gold Rate Today: Dip buying in Gold is the preferred trade as the yellow metal is expected to reach $3,000 in the coming weeks.

Gold – Nonfarm payroll report awaited

 

Gold Performance:

 

Spot gold traded between $2,891 and $2,927 on March 6, 2025. The metal was changing hands at $2,920, up by $1. The MCX April Gold contract at Rs 86,070, up 0.28 per cent for the day. 

 

It was, somewhat, a rangebound session as traders bide time ahead of the US nonfarm payroll report to be released today. 

 

Tariff Developments:

 

US President Donald Trump has exempted Mexico from his 25 per cent tariffs on goods and services under the North American Trade Agreement known as USMCA. The exemption will last until April 2. Earlier, he had exempted Canadian autos and auto parts that were being imported under the trade deal. Though it is not clear whether the full USMCA exemption will be extended to Canada.

 

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The current US tariff is at the highest level since 1940.

 

Event roundup:

 

The European Central Bank lowered the key rates for the sixth time since June 2024, as it reduced the deposit rate by 25 bps to 2.50 per cent on Thursday. The Central Bank officials said that the current monetary policy stance is meaningfully less restrictive. They expect the Euro-zone inflation to reach their 2-per cent target by early 2026, rather than this year as expected earlier. The Euro rose further on the comments as traders think that the Bank might be nearing the end of its monetary policy easing exercise.

 

The Euro, supported by Germany's plans to ramp up its borrowing, has gained nearly 5 per cent in the last five sessions. Spain, Italy, and France are also likely to strengthen their defence capabilities.

 

Upcoming events:

 

An Emergency EU Leaders' Summit in Brussels on Thursday is also in traders' focus for details on defence budget for Ukraine after the US pulled back from its commitment to European Security.

 

The Fed Chair Powell will speak on economic outlook at Chicago Booth's 2025 monetary Policy Forum at 11 PM IST.

 

Data roundup:

 

ADP employment change (January) came in at 77,000 versus the estimate of 140,000, which is the lowest reading since December 2023, though ISM services (February) topped the forecast.

 

Thursday's data showed that the US nonfarm productivity (Q4 final) at 1.5 per cent beat the estimate of 1.2 per cent as unit labour costs (Q4 final) at 2.2 per cent trailed the forecast of 3 per cent (prior 3 per cent). The weekly job report was mixed as initial jobless claims (March 1) at 221,000 were below the estimate of 233,000, but continuing claims (February 22), at 18,97,000, were way higher than the estimate of 18,74,000. The US trade deficit widened to a record $13.4 billion in January as companies rushed to import before tariff deadlines.

 

US growth concerns surface:

 

As per Bloomberg, Trump's trade war policies may slow down the US growth in the near-term as the tariffs may act as a negative supply shock that may shave off around 1.3 per cent of US GDP. It is to be noted that consumer spending fell by the most in nearly four years in January as consumer confidence slumped, while ISM manufacturing prices paid, a gauge of the prices paid for materials, surged to the highest since June 2022.

 

US Dollar and yields:

 

The US Dollar Index tumbled for the fourth straight day as it fell to 103.76, the lowest since November 2024. The Index, on Thursday, was noted at 104.07, down 0.20 per cent for the day. The Dollar is under pressure on a string of dismal US data and rising yields in Europe. The ten-year Germany bund yields reached 2.93 per cent, the highest since October 2023, on Germany's historic plan to shore up funds for defence and infrastructure.

 

The ten-year US yields at 4.29 per cent, were up around 0.40 per cent for the day, as global yields rise. Two-year US yields at 3.97 per cent, fell around 3 bps, which steepened the 2-10-year yield curve as growth concerns mount.

 

Central Banks continue to buy gold:

 

As per the World Gold Council (WGC), global reserves increased by 18 tonnes during the first month of the year.

 

Upcoming data:

 

Traders will monitor the crucial US monthly nonfarm payroll report (February) to be released today. Going by the ADP data released on Wednesday, the report may reflect a weakening job market.

 

Gold ETF:

 

Total Known Global Gold ETF holdings rose to a fresh cycle high of 85.895MOz, the highest since December 2023. The ETF holdings are up around 4 per cent this year.

 

COMEX Gold inventory:

 

COMEX Gold inventory rose to 39.673Moz, a fresh cycle high and the highest-ever, on delivery demand as COMEX buyers opt for delivery.

 

Gold Outlook:

 

Deteriorating US economic outlook, lingering economic and political uncertainties as trade war rages, weakness in the US Dollar, and buying by central banks for their reserves are positive factors for the metal. 

 

The US nonfarm payroll report may reflect weakness in the US labour market. China's fiscal spending plans and the US administration rolling back some of the planned tariffs have reduced its safe haven to some extent. 

 

Nonetheless, gold is likely to trade with a positive bias. It may range trade ahead of the US monthly job report. US Fed Chairman Jerome Powell's speech will also be an important factor.

 

Overall, dip buying is the preferred trade as the yellow metal is expected to reach $3,000 in the coming weeks.

 

Support is at $2,888 (MCX April Gold contract Rs 85,126)/$2,868 (Rs 84,500). Resistance is at $2,930 (Rs 86,300)/$2,956 (all-time high; Rs 87,100).

   

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Disclaimer: Praveen Singh is associate vice president of fundamental currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.