Gold Price Forecast: XAU/USD retreats further from all-time highs of $3,245
- Gold price reverts toward $3,200 early Monday, correcting from record highs.
- The US Dollar holds the bounce amid upbeat mood and the latest tariff news.
- Gold price looks to Fedpeak and Chinese trade data for near-term trading impetus.
Gold price is back in the red early Monday, snapping a three-day record rally to lifetime highs of $3,245 set on Friday.
Gold price corrects on improved risk sentiment
Safe-haven flows appear to have eased in Asian trading on Monday as traders rejoice in Wall Street's turnaround on Friday alongside some positive updates on the US-China tariff war, alleviating the bullish pressure on the Gold price for now.
On Friday, China responded to the US tariff hike to 145% by raising tariffs on American goods to 125%. However, Beijing said it would ignore further US responses.
Over the weekend, US President Donald Trump considered imposing 20% tariffs on Chinese semiconductors and the electronics supply chain against the previously announced 145% levies.
These tariff updates seem to be perceived positively by markets, as they provide some consolation and allow a modest recovery in the US Dollar against its major currency rivals from 35-month lows.
The US Dollar uptick and risk appetite keep the corrective downside intact in Gold price as traders await China’s Trade Balance report and speeches from several US Federal Reserve (Fed) policymakers for further trading impetus.
Markets could use the excuse of not-so-steep tariffs on Chinese electronics and chips to take profits off the table following the recent Gold price upsurge.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.