Gold to Log First Monthly Gain Since January After Trump’s Punishment Tariff to Mexico

Gold is trading positive on Friday and ready to close its first positive month since January. Trump punishment tariff to Mexico fueled risk aversion.
Mauricio Carrillo
Gold to log first monthly gain since January after Trump's punishment tariff to Mexico
Gold to log first monthly gain since January after Trump’s punishment tariff to Mexico

Precious metals are trading mixed on the last day of the week and the month as investors are digesting trade war news and economic releases.

Gold is adding gains on Friday as risk aversion is taking the market, and also the dollar is suffering Trump’s news on new tariffs to Mexico. XAU/USD is now testing the 1.300 level, and it is ready to close its first positive month in four.

Silver is trading negative on Friday as the unit was unable to break above the 14.60 area against the dollar. Copper is trading negative for the fourth day in a row as the XCU/USD is extending its decline after breaking below the 2.650 level.

Palladium is trading flat on the last day of the week as the pair is now consolidating gains after Thursday’s rally. It is currently testing the 50-day moving average level at 1,382.

Platinum remains trading low around 790.00 as the unit is now testing the 790.00 area for the third day in a row.

Trump to impose tariffs to Mexico

Another chapter of Donald Trump personal crusade against of “American enemies” happened on Thursday. Trump tweeted that the White House would impose a 5% new tariff to all Mexican goods starting on June 10 as a retaliation for the lack of efforts in the war against illegal immigration.

The Trump tariff threat could go up to 25% in the coming months if Mexico does not take action “reduce or eliminate the number of illegal aliens” attempting to cross into the United States.

The news took many experts by surprise, but it is in line with Trump’s behavior. The announcement opened the door for concerns about how Trump will use tariffs as a war weapon not only against countries with a preferred economic framework but also for political reasons or personal opinions.

Now, markets are suffering the consequences with the Dow Jones set to have a triple-digit drop on Friday with auto stocks falling hard.

The news is also impacting the Dollar index as the unit is falling amid a possible trade crisis between the US and Mexico. In addition, speculations that the Fed will be forced to an interest rate cut are undermining the greenback.

In this framework, gold is taking advantage with the XAU/USD rallying to test the 1.300 area.

Gold jumps to the 1.300 amid risk aversion

XAUUSD daily chart May 31

Price of gold is trading positive on Friday as investors are looking for safe havens after Trump’s announcement of a punishment tariff against Mexico.

Currently, XAU/USD is trading 0.80% positive on the day at 1,300, where the pair is now fighting to extend gains beyond the 1.303 resistance.

With today’s gains, the metal has turned positive in the week and the month and now the XAU/USD is ready to close its first positive month since January.

“Gold is being supported today by lower demand for risky assets, a plunge in Treasury yields and most of all, a weaker US Dollar,” FX Empire analyst James Hyerczyk said in a recent article. “The catalysts behind the price action are the fear of a global recession and a US Federal Reserve interest rate cut.”

Technical indicators suggest more room for the upside, at least in the short term. Next resistances are located at 1,303, as mentioned before, 1,310, April 10 highs, and then the 1,320 area, March highs.

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