Price of Gold Fundamental Daily Forecast – Uncertainty Over Tariffs Could Lead to Rangebound Trade

Gold prices are trading higher early Friday in reaction to a weaker U.S. Dollar. Traders are afraid that President Trump’s decision to impose trade tariffs on steel and aluminum imports may lead to retaliation that should have a negative effect on the U.S. Dollar which could conceivably provide gold with some support.

At 0854 GMT, April Comex Gold futures are trading $1318.50, up $13.30 or +1.02%.

On Thursday, the Trump administration said the tariffs would protect U.S. industry, but the dollar and stocks fell sharply as the plan sparked fears of a trade war and worries about its potentially negative impact on the world’s largest economy. Trader reaction to this news had a positive effect on gold prices.

Earlier in the session, Federal Reserve Chairman Jerome Powell offered up some negative news. In his second day of testimony this week, Powell said there was no evidence the U.S. economy is overheating, and labor markets may still have room to improve as the central bank sticks with a gradual pace of rate hikes.

Forecast

The main trend is down in gold on the daily chart, but on Thursday, the market found support inside a major retracement zone at $1306.60 to $1291.50.

It would be easy to say that aggressive counter-trend buyers stopped the selling on Thursday at $1303.60, however, this isn’t how the events unfolded. The surprise tariff actually triggered a short-covering rally.

The battle lines have been drawn. Both bullish and bearish gold traders are going to watch and react to the direction of the U.S. Dollar.

The dollar is likely to weaken if Canada, Asia and Europe decide to retaliate against the new U.S. tariffs. Losses could be softened by higher U.S. Treasury yields, which tend to make the dollar a more attractive investment. A weaker U.S. Dollar should be supportive for gold prices.

At this time, all we have is the trend, the support zone and uncertainty over the timing of the expected retaliation. Because of this, I suspect gold is going to become rangebound until investors decide how to play the market.

The trend is clearly to the downside, but if there is enough uncertainty, we could see a counter-trend short-covering rally in gold over the near-term.