Gold Breaks Above $2,800 on Economic Uncertainty – US Dollar React To Tariff Threats

Financial Markets reacted strongly to President Trump’s tariff announcement on Canada and Mexico, creating uncertainty in global trade. Investors sought safe-haven assets, leading to a sharp rally in gold (XAU) prices, which surged to record levels of $2,817 per ounce on Friday. Trade tensions typically weaken economic confidence, prompting investors to hedge against currency risks and inflation with gold. As tariffs increase business costs, concerns about slower economic growth further support gold’s appeal as a store of value. The US dollar index (DXY) also receives volatility due to trade uncertainty, indirectly fueling higher gold demand.

Despite rising gold prices, inflation remains controlled. Core PCE inflation is holding steady at 2.8%, just above the Fed’s 2.0% target, as shown in the chart below. The trimmed mean and headline index also indicate stable inflationary trends, reducing the urgency of aggressive monetary policy shifts.

On the other hand, a sharp decline in heavy truck sales signals potential economic weakness, reinforcing recession fears. The chart below shows that heavy truck sales have declined to levels equivalent to those observed during the 2020 recession. If the economy slows, the Federal Reserve may reconsider its rate policies, potentially lowering interest rates to stimulate growth. Lower rates would diminish the opportunity cost of holding gold, further boosting gold’s long-term outlook as investors seek protection from financial instability.

Silver (XAG) is preparing for its next strong move higher despite gold breaking record levels. The ISM Manufacturing PMI, JOLTS job openings, ISM Services PMI, and NFP report will determine the market’s next direction.

Gold (XAU) Technical Analysis

Gold Daily Chart – Bullish Breakout above $2,800

The daily chart for gold shows that the price has broken the record level of $2795 and closed the week with its highest weekly close. This breakout was a key factor in gold’s surge toward $3,000.

However, Friday’s price reaction turned negative in the final hours, forming a sharp shadow on the daily candle. This price correction was driven by ongoing uncertainty in the financial markets, leading to a temporary pullback. The shadow on the daily candle suggests a potential risk of further correction before the next strong rally, as the price has reached overbought levels based on RSI. Despite this, the overall trend remains upward; any correction is considered a buying opportunity.

Gold 4-Hour Chart – Ascending Channel

The 4-hour chart for gold shows that the price is trading within an ascending channel and maintaining positive momentum. The price has hit resistance at $2815, which aligns with the resistance of the ascending channel, and has started to correct lower. A correction from this level presents a buying opportunity to target new record levels.

Silver (XAG) Technical Analysis

Silver Daily Chart – Positive Price Development

The daily chart for silver shows that the price has formed a strong weekly candle and is approaching the $32.50 resistance area. This level is marked as a key resistance, and a break above it will initiate upward momentum toward $35. The 50-day SMA remains above the 200-day SMA, and the RSI stays above the mid-level, indicating positive price action.

Silver 4-hour Chart – Breakout From Consolidation Zone

The 4-hour chart for silver shows that the price is forming a double bottom pattern around $28.80 and has broken above the orange zone. A price correction toward the orange zone, between $30.90 and $30, may initiate a strong rebound in silver prices toward $35.

US Dollar Index (DXY) Technical Analysis

US Dollar Daily Chart – Rebound from Key Level

The daily chart for the US Dollar Index shows that it has found support at 107 and formed positive price action. The key reversal candles around this support level indicate bullish momentum.

A break above 110 would confirm continued bullish momentum. Additionally, the 50-day SMA remains above the 200-day SMA, and both moving averages are rising, further indicating strong bullish momentum in the US Dollar Index.

US Dollar 4-Hour Chart – Inverted Head and Shoulders

The 4-hour chart for the US Dollar Index shows the formation of an ascending broadening wedge pattern. The index broke below the broadening wedge but reversed within the broadening pattern, indicating positive price action.

The reversal from the 107 support level has formed an inverse head and shoulders pattern, further confirming bullish momentum and positive price action.