Gold prices rallied to a two-week peak on Tuesday, reaching $3,400 per ounce, up over 2.70%. The surge follows the resumption of trading in Chinese markets after a long weekend holiday and mounting concerns surrounding US trade policies. Additionally, rising geopolitical risks, including the escalating conflict between Pakistan and India, provided further support for the precious metal.
Wall Street closed in the red on Tuesday as traders processed US President Donald Trump’s latest remarks on trade policies. Trump indicated he would take a flexible approach to setting tariffs, leading to market uncertainty. Investors shrugged off earlier comments from US Treasury Secretary Scott Bessent about potential trade deals with 17 countries, which had initially sparked optimism.
Tensions between India and Pakistan intensified after India reportedly targeted terrorist camps in Pakistan, but avoided military sites. The Indian government confirmed it had conducted military strikes on “terrorist camps” in response to a deadly militant attack in Kashmir last month. Pakistan’s defense chief warned of an impending confrontation with India, further escalating fears in the region.
Meanwhile, the US trade deficit widened in March, with the Commerce Department reporting a $-137 billion deficit, surpassing expectations. Attention now turns to the Federal Open Market Committee (FOMC) meeting, where the Federal Reserve is expected to keep interest rates unchanged. Investors will be closely watching Fed Chair Jerome Powell’s post-meeting comments for guidance on future monetary policy.
Market Movers: Falling US Treasury Yields Support Gold Prices
A significant factor driving gold’s rally is the decline in US Treasury yields. The yield on the US 10-year Treasury note fell by five basis points to 4.298%, while real yields on Treasury Inflation-Protected Securities dropped by three basis points to 2.038%. These lower yields make gold more attractive, as the precious metal competes with fixed-income assets.
The US Commerce Department’s report on the trade balance showed a larger-than-expected deficit, adding to the uncertainty in the market. While the US economy remains resilient, as evidenced by last week’s strong Nonfarm Payrolls report and Monday’s ISM Services PMI data, geopolitical risks related to the ongoing Russia-Ukraine conflict, the Israel-Hamas war, and tensions between India and Pakistan are likely to dominate market sentiment, overshadowing macroeconomic indicators.
Technical Outlook: Gold Price Eyes $3,450 as Next Target
From a technical perspective, gold prices are poised to extend their upward trajectory. A bullish chart pattern, specifically the ‘bullish harami’ two-candle formation, has fueled the rally. Following the breakout above the $3,400 level, gold could test $3,450, with the all-time high of $3,500 within reach.
However, if gold falls back below $3,400, the next support level to watch is $3,350. Should prices weaken further, the $3,300 mark would provide additional support for buyers. The geopolitical landscape and upcoming economic data will be key factors influencing gold’s movement in the near term.
