Yesterday gold found some support in the $2,950 area. It bounced off here and has managed to push back above $3,000 in early trade this morning. It was only four trading sessions ago that gold hit a fresh all-time high of $3,167. From there to yesterday’s low, it lost over 6%, or more than $200 per ounce.
This came as a surprise to many observers who viewed gold as the ideal safe-haven in uncertain times, which is undoubtedly the situation in which the world finds itself. The trouble is that gold’s response to Trump’s reciprocal tariff shock has to be seen in a wider context.
That is, that gold has been enjoying a strong rally for many years now, taking it to a succession of record all-time highs, with the latest being last Thursday’s. This has encouraged a large amount of speculative buying, with much of this employing leverage.
Add in all the leveraged buyers of individual stocks, stock indices, ETFs and the rest (bearing in mind that both the S&P and NASDAQ hit their own respective all-time highs just six weeks ago), and it’s plain to see that the panicked stock market sell-off last week triggered a flurry of margin calls which have been met with large scale liquidations of just about everything, and certainly those risk assets which have outperformed recently, and therefore can be liquidated relatively painlessly.
So where now? The daily MACD is no longer at seriously overbought levels. But that doesn’t mean gold will seamlessly resume its longstanding rally from here. It may do. And the reasons for diversifying into gold are fairly compelling. But it may need to retest support again, or at least consolidate around current levels, to rebuild a base from which it can rally.
Alternatively, we may have seen the top. Much depends on how much more tariff turmoil is ahead.
