Safe-haven demand for gold may rise further; check support, resistance here

Considering the facts that US equities fell 4-6% in the wake of tariffs and some of the commodities like silver and crude oil slumped 6-7%, gold fared much, says Praveen Singh of Mirae Asset Sharekhan

Gold: A fresh record high before ending lower as risk assets nosedive

 

Performance

 

On April 3, spot gold, buoyed by renewed safe haven demand due to unexpectedly high reciprocal tariff rates that pose a risk to the global trade and economy, soared to a fresh record high of $3167.84.

 

On April 2, the US President Trump unveiled much-awaited reciprocal tariffs that sent a shockwave to the global economy as announced tariffs were much more severe than the markets’ expectations. However, the yellow metal tumbled all the way to $3054 in the US session as investors liquidated their long gold positions due to margin calls coming on slumping risk assets; tentative selling as commodities tumbled also weighed on the yellow metal.

 

 

Gold regained its footing on a weaker-than-expected US ISM services data released on Thursday.

 

Spot gold closed with a loss of 1.52 per cent at $3114.

 

Reciprocal tariffs announced

 

Much against the markets’ expectations of the US levying a 10 per cent baseline tariff on all the concerned countries, the announced tariffs turned out to be quite severe and have shocked the markets. The reciprocal tariffs, announced by the Trump Administration on April 2, 2025, are based primarily on the US trade deficit with an individual nation. The tariffs have been calculated by dividing a country’s trade surplus with the US by its total exports, based on data from the US Census Bureau for 2024, then dividing that number by two, to arrive at the so-called “discounted” rate. The discounted tariffs are roughly half of what the countries levy on the US exports. Even the countries with which the US runs a trade surplus have also been hit as these countries will face a flat 10 per cent rate regardless. Reciprocal tariffs on the EU will amount to 20 per cent, 34 per cent on China, 24 per cent on Japan and 10 per cent on the UK. China, considering the 20 per cent tariffs imposed earlier, will be subjected to a 54 per cent tariff rate.  ALSO READ | Gold price climbs ₹10 to ₹93,390, silver declines ₹100 to ₹1,02,900

 

Despite a possibility of eventually lowering tariffs down the line through new deals with trading partners, the present situation looks grim as the concerned countries, like China, France and Germany, may retaliate, though some of the countries like Mexico and UK intend to ‘wait and watch’ before acting.  US Commerce Secretary Lutnick, on April 3 warned that retaliating nations may face higher tariffs. 

 

It is being estimated that tariffs may shave around 1.3 per cent off the US GDP growth. The impact on China’s economy could be more than 2 per cent.

 

Data roundup

 

US data released on Thursday were largely disappointing. US weekly job data were mixed as initial jobless claims (March 29) came in at 219k (estimate 225K) but continuing claims (March 22) soared from 1847K to 1903K, more than a three-year high. ISM services Index (March) fell from 53.50 to 50.80 (forecast 52.90), slowest since July 2024 as ISM services employment unexpectedly contracted.

 

Upcoming data

 

Today, the US non-farm payroll report (March) will be released. The median estimate of change in non-farm payrolls is 140K (prior 151K). The report will be crucial to financial markets.

 

US Dollar Index and yields

 

The US Dollar Index dropped by most on record as US yields crashed on economic concerns. Investors are worried that the new tariff regime may hurt the economic prospects of the US more than that of other nations. Dollar was down against all Group-of-10 peers as Yen and the Euro led the pack. The Dollar Index closed with a loss of 1.95 per cent at 101.78. The Euro rallied 2.7 per cent, the sharpest intra-day gain in nearly a decade.

 

The ten-year US yields fell below 4 per cent for the first time since Trump's re-election as a President. The yields settled at 4.02 per cent, down around 2.4 per cent on the day. The two-year US yields fell to 3.68 per cent, lowest since October 4, and settled 3.78 per cent lower at 3.69 per cent.

 

ETF

 

Total known global gold ETF holdings fell from 88.01MOz on April 1 to 87.96MOz on April 2, though the holdings are up around 6 per cent YTD as holdings have risen for nine straight weeks.

 

COMEX Gold inventory

 

COMEX gold inventory at 44.464MOz is at a record high on delivery demand. Inventory has risen more than 100 per cent this year. Silver:

 

Outlook

 

As the global economy is being subjected to a historic shock amid rising odds of stagflation risk to the US economy, safe-haven demand for gold is likely to rise further. Considering the facts that US equities fell 4-6 per cent in the wake of tariffs and some of the commodities like silver and crude oil slumped 6-7 per cent, gold fared much better. Outlook for the metal remains constructive as the Trump Administration redraws a global order map amid heightened economic and political uncertainties, though the metal may witness a short-term volatility on long liquidation due to margin calls in risk assets amid tumbling industrial commodities. Nonetheless, buying the dips is the preferred option unless the US nonfarm payroll report surprises to the upside. Support is at $3050 (MCX June contract Rs 88600)/$3000 (Rs 87,000). Resistance is at $3168 (Rs 92,000)/$3200 (Rs 93,000). As long as the metal holds above $3000, the possibility of it reaching $3200 is reasonably high.

  (Disclaimer: Praveen Singh is an associate VP of fundamental currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.)