Gold price may break the peak due to trade tensions

According to Kitco - the S&P 500 index began to fall sharply on Monday afternoon after US President Donald Trump announced that he would impose a 25% tax on imports from Canada and Mexico from midnight on Tuesday. At the same time, he also expanded tariffs on Chinese goods, pushing the US into a global trade war.

The stock index lost 104 points on Monday and continued to fall on Tuesday, falling below the important support level of 5,800 points.

As of 10:05 a.m. ET, the S&P 500 was trading at 5,763 points, down 86 points (nearly 1.5%). Meanwhile, gold prices have rebounded strongly above $2,900/ounce. The April gold futures were trading at $2,919.50 an ounce, up 0.63% on the day.

Ole Hansen - Head of Commodity Strategy at Saxo Bank - commented that gold still has room to increase after the recent slight correction. According to him, the target of $3,000/ounce is returning to the target.

The outlook for gold remains positive, especially as the recent correction only took place in a short time, showing strong demand even with selling pressure from traders according to technical analysis.

In addition to the need for diversification and safe havens, gold will continue to be supported by central bank purchases amid concerns about rising public debt, Hansen wrote in the latest report on the precious metal.

In addition to geopolitical uncertainties that strengthen gold's safe-haven role, Hansen also pointed out that the USD is weakening as the USD Index tests the important support level at 106 points.

At the same time, the slow growth of the US economy has increased expectations that the US Federal Reserve (FED) will be forced to cut interest rates this year, even if inflation remains high.

While we understand that the market will never go in a straight line apart from Trumps cryptocurrency pumping we still maintain the recently adjusted target of $3,300/ounce, Hansen said.

Regarding gold's potential, Hansen noted that demand for gold ETFs has increased significantly in recent weeks, although speculators' interest has remained volatile.

Although physical gold-based ETF purchases rose last month, total holdings are still at just 85.8 million ounces well below the 2022 peak of 107 million ounces, he said.