Gold's rally extends as tariff concerns and recession fears grow: what's next?

Gold prices climbed again on Tuesday after a slight dip in the previous session as uncertainties over Trump’s tariffs next week aided safe-haven inflows. 

Fears over an US recession also supported the non-yielding gold price on Tuesday.

“Gold price (XAU/USD) struggles to build on modest intraday gains, though it manages to hold above the $3,000 psychological mark through the first half of the European session on Tuesday,” Haresh Menghani, editor at FXstreet, said in a report. 

At the time of writing, the most-active June gold contract on COMEX was at $3,053.91 per ounce, up 0.3% from the previous close. 

The most-active silver contract on COMEX was at $33.758 per ounce, up 0.9% from the previous close. 

“Adding to this, the lack of follow-through selling below the $3,000 pivotal point warrants some caution before confirming that the XAU/USD has topped out in the near term and positioning for an extension of the recent pullback from the all-time peak,” Menghani said. 

Tariffs and interest rates

US President Donald Trump's announcement on Monday that automobile tariffs are coming but that not all threatened levies would be imposed on April 2 was taken by Wall Street as a sign of flexibility on a matter that has roiled markets for weeks.  

Trump's tariff policies are widely seen as likely to contribute to slowing economic growth, drive up inflation and trigger further trade tensions.

Raphael Bostic, the Atlanta Fed President, predicted slower inflation progress in the coming months and a potential central bank benchmark rate cut of only a quarter of a percentage point in 2025.

Menghani added:

Demand for US dollar and short-term opportunities around the XAU/USD pair could be driven by speeches from influential FOMC members during the North American session, according to FXstreet.

UBS raises gold price forecast

UBS, a prominent global financial services firm, has revised its gold price forecast upwards. 

The bank now anticipates that the price of gold will reach $3,200 per ounce within the next four quarters. 

This marks a significant increase from their previous forecast of $3,000 per ounce, which had been maintained for a considerable period.

The increasing likelihood of a prolonged global trade conflict was a key factor in the UBS analysts' bullish revision, highlighting gold's role as a store of value, according to a Kitco report.

Technical outlook

“From a technical perspective, the XAU/USD pair has been showing some resilience near the $3,000 mark. The said handle is likely to act as a key pivotal point, which if broken decisively might prompt some technical selling and drag the Gold price to the $2,982-2,978 region,” Menghani said. 

The resistance breakpoint, previously at $2,956-2,954, now acts as a support level for gold and may cause the corrective fall to extend further towards this range.

On the other hand, the overnight swing high of $3,033 is now the immediate resistance level, followed by the all-time high of $3,057-3,058, which was reached last week.

“Given that oscillators on the daily chart are holding comfortably in positive territory, some follow-through buying will be seen as a fresh trigger for bulls and set the stage for an extension of a multi-month-old uptrend,” Menghani added.