Gold was trading at more than US$3,486 per ounce on Tuesday afternoon, not only exceeding what markets called the “next key technical resistance” of US$3,350 but smashing through it.
The yellow metal has far exceeded market expectations in only the first few months of the year. Namely, Goldman Sachs last week upgraded its year-end gold forecast to US$3,700 versus US$3,300.
“This week’s stress in the US bond market and gold’s rally today and yesterday increase our conviction that gold is uniquely positioned to hedge recession risk,” Goldman Sachs’ commodities team said at the time.
In a recent update from ANZ Research, the big four bank similarly affirmed its bullishness on the yellow metal and upgraded its gold price forecast to US$3,600 by year end.
According to the World Gold Council, tariff uncertainty continues to weigh on global markets, with investors flocking to the key safe haven asset as confidence in US assets erodes.
But markets have had another reason to rotate out of risk assets, thanks to the emerging scuffle between the US President and a key nonpartisan federal agency, the US Federal Reserve.
“With energy costs way down, food prices (including Biden’s egg disaster!) substantially lower, and most other ‘things’ trending down, there is virtually No Inflation. With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr Too Late, a major loser, lowers interest rates, NOW,” Donald Trump wrote on his social media platform, Truth Social, earlier this week.
Those betting on a US growth asset recovery this month, following the pause of many “Liberation Day” tariffs, were disappointed to find the relationship between the US government and the central bank had dipped to a new low.
As such, US markets slumped on Monday with the Dow Jones index tumbling 972 points (2.5 per cent), the S&P 500 dropping 2.4 per cent, and the Nasdaq shedding 415.5 points (2.6 per cent).
“Investor confidence in US assets weakened further on fears Trump might fire Fed chair Powell: the dollar plunged early Monday, sending gold to another record high,” the World Gold Council said in a statement on Tuesday.
“Another nervous week awaits with Powell purge fears front and centre.”
Similarly, investment manager US Global Investors described the latest gold rally as a “classic Fear Trade” in the wake of a collapse in investor sentiment to a three-decade low.
“Eighty-two per cent of participants said they believe the global economy will shrink, marking the most pessimistic reading in the survey’s history,” US Global Investors pointed out.
In a surprising turn of events, bitcoin, too, has been gaining steadily, undeterred by Trump’s assault on Jerome Powell, pushing above US$88,000 for the first time in over a month.
