Volatility in gold prices likely to persist

Business Recorder

28-04-2025

The world has become increasingly aware of the economic repercussions caused by tariffs, which have unsettled global economies.
The current discussions surrounding tariffs have significantly influenced economic performance and prospects, dampening business confidence and increasing market volatility. This prevailing uncertainty has made it challenging for policymakers to develop effective fiscal and monetary strategies. One of the greatest miscalculations for those shaping policy is underestimating the rising costs, which could soar to unpredictable levels.
For instance, countries without a trade surplus or burdened by debt could face intense pressure from higher borrowing costs, as they rely on incoming capital.
However, by the latter part of last week, global market conditions appeared to stabilise somewhat.
The more stable tariff environment could suggest that there are possibly discussions taking place behind the scenes between the US and China, the leading global trading partners, along with others.
Despite mixed messages, some media reports suggest that negotiations between the two nations (US and China) are already underway, although this remains unconfirmed.
In light of these developments, with no major negative news surfacing, there was a degree of stability observed in global financial markets.
A noteworthy positive development was the decrease in US 10-year Treasury yields to 4.27%, signaling a favourable trend for US assets.
The US Dollar regained its strength, with the DXY index recovering some of its footing after being under pressure for the past six weeks. Meanwhile, the Euro, Pound Sterling, Swiss Franc, and Japanese Yen all declined. Gold prices, which had surged due to their safe-haven status amidst trade tensions, dropped significantly after reaching highs of $ 3,500 per ounce. Oil, being demand-driven, appears stable at current levels. Overall, the past week ended on a positive note.
Nevertheless, investor sentiment remains jittery and cautious due to the lack of a clear outcome from ongoing negotiations.
A critical point keeping the markets on edge is the timeline provided by President Donald Trump, who indicated on Friday that a trade deal might take three to four weeks. This timeframe could contribute to further uncertainty for global market participants.
From an economic data standpoint, the upcoming week promises to be busy, with key figures set to be released by advanced economies, particularly from the US. There will be a keen focus on consumer confidence data, which may decline in response to rising prices and unfavorable job conditions stemming from tariffs.
Discussions of a potential recession are already under way, and forthcoming data will likely offer additional insights. The first quarter GDP figures will be closely scrutinized to evaluate the tariff's impact, especially concerning potentially increased import costs. Additionally, the US jobs report will shed light on hiring trends, which may be slowing due to uncertainties surrounding trade.
Last week, I made two accurate predictions, gold surpassed my target of $ 3,490, reaching a high of $ 3,500, and I anticipated it could decline to the $ 3,260-65 range, which was spot on.
The volatility in gold prices is expected to persist, as market attention will be drawn to forthcoming US economic data that may provide insights regarding recession risks, inflation, and job market conditions, issues of significant concern for the US administration.
That said gold, being sensitive to data, remains particularly vulnerable to news related to tariffs. The global financial markets are likely to stay volatile and continue to face challenges until there is visible progress towards a trade agreement between the US and its major trade partners, especially China.
WEEKLY OUTLOOK - April 28-May 02
GOLD @ $ 3318— Expect continued volatility in gold prices, which are likely to fluctuate within a broader range. Much will hinge on progress in trade negotiations. Key levels to monitor are between $ 3335-40. A breakthrough could drive prices up to $ 3375 or $ 3410. However, I anticipate the possibility of a further drop if it falls below $ 3242, potentially reaching down to $ 3205 or $ 3175.
EURO @ 1.1364— Euro finds strong support near 1.1250, which is expected to hold. A rise beyond 1.1430 will push it toward 1.1495, while failure to do so could result in a drop to 1.1170.
GBP @ 1.3310— Pound Sterling has established support around 1.3220 and 1.3170, which are likely to remain intact for an upward test. However, unless it can rise above 1.3440 for 1.3510, Cable is projected to trade within this range.
JPY @ 143.67— A strong USD will attempt to rise, but it must overcome the resistance at 144.80 to reach 145.50. If it fails to surpass this initial barrier, it could decline to 142.20 or even down to 141.50.
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