Gold edges down as Trump extends deadline for EU tariffs
- Gold price slips back below $3,340, erasing some of Friday’s gains.
- Markets head into risk-on after Trump announced a delay on EU tariffs until July 9.
- US debt concerns linger, capping the downside for the precious metal.
Gold (XAU/USD) price slips on Monday towards $3,325 at the time of writing, partly erasing Friday’s gains. The small dip comes after United States (US) President Donald Trump announced he would extend to July 9 the deadline for the European Union (EU) to face 50% tariffs. The decision came after a call between Trump and European Commission President Ursula Von Der Leyen on Sunday, and should help the EU broker a trade deal with the Trump administration.
While markets turned risk-on after the temporary reprieve period and Gold slipped, this does not mean the rally in the precious metal is over. A softer stance on trade weakens the safe-haven demand for Gold, but the metal’s safety appeal is still strong amid growing concerns about the fiscal position of the US government. Investors remain concerned that Trump’s tax bill, which last week passed the House and will be debated in the Senate, will further increase both the US deficit and debt.
Daily digest market movers: Small extension
- US President Trump on Sunday announced that his plans to hit the EU with 50% tariffs would be delayed until July 9 to allow for time for both sides to negotiate a deal. The US leader on Friday had threatened higher-than-expected 50% levies against the bloc, while also warning Apple Inc. that it would be subject to 25% tariffs if it does not manufacture its iPhones in the US, Bloomberg reports.
- Josh Gilbert, market analyst at eToro, warned that these delays aren’t bringing any structural changes to Trump’s tariff policy. “Pauses are all well and good for now, but during this time, we need to see more agreements in place to confirm Trump’s more negotiable approach,” he said, Bloomberg reports.
- Vietnam’s Prime Minister Pham Minh Chinh has asked the country’s central bank, finance ministry and relevant agencies to study the establishment of a regulated Gold exchange to enable transparent public trading and prevent smuggling and manipulation, according to a statement on the government's website, Bloomberg reports.
- The US Dollar also falls on Monday, extending Friday’s losses, as enthusiasm appears to have faded for the world’s reserve currency this year amid mounting fiscal concerns in the US. Speculative traders remained bearish on the dollar but trimmed their positioning to $12.4 billion in the week ending May 20 from $16.5 billion in the week prior, according to CFTC data reported Friday, Reuters reports.
Gold Price Technical Analysis: Tariff pause doesn’t mean a change
Gold takes a step back as investors flee to risk assets following the agreement between Trump and von der Leyen to continue to negotiate about trade. Still, the delay is only a minor one, by just a month, and brokering a trade agreement between the two blocs is nearly impossible to do in such a short time span.. Therefore, these headlines need to be seen as brief injections of reliefs within an overall narrative that is still supportive for Gold due to heightened uncertainty.
On the upside, the R1 resistance at $3,386 is the first level to look out for as resistance. The R2 resistance at $3,415 follows not far behind and could open the door for a return to the $3,440 round level and potentially further course to new all-time highs at $3,500.
On the other side, some thick-layered support emerges in case the Gold price declines. On the downside, the daily S1 support comes in at $3,307, safeguarding the $3,300 big figure. Some intermediary support could come from the S2 support at $3,258. Further below, there is a technical pivotal level at $3,245, roughly converging with the S2 support at $3,240.
XAU/USD: Daily Chart
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.