- Gold retreats after hitting Fibonacci resistance in response to Trump’s tariff threats.
- Bullion gains on increased demand for safe-haven’s ahead US inflation data release on Tuesday.
- XAU/USD bullish breakout brings $3,400 psychological resistance into focus.
Gold (XAU/USD) is trading in a narrow range between $3,350 and $3,370 on Monday in response to news that the US may impose a 30% tariff on imports from the European Union (EU) and Mexico, effective August 1.
The latest tariff threats on two of America’s largest trading partners have provided a tailwind for XAU/USD. At the time of writing, the Gold price is trading near $3,355 as bulls aim to target psychological resistance at $3,400.
European Commission President Ursula von der Leyen and Mexican President Claudia Sheinbaum received letters from US President Donald Trump on Saturday. His remarks fueled fears of a new wave of blanket tariffs, boosting demand for Gold as a geopolitical hedge.
A busy day of economic data on Tuesday will likely serve as an additional catalyst for Gold. As policymakers assess the potential implications of the country-specific and sector-specific tariffs, US inflation data will be in focus.
Gold daily digest: XAU/USD reacts to Trump tariffs ahead of key economic data releases
- Reuters reports indicate that 23 countries have received letters from the US President to date. Tariffs of 50% on imports from Brazil remain the highest announced so far.
- Formal letters have also stated that these rates “may be modified, upward or downward, depending on our relationship with your country.”
- President Trump’s Truth Social post also warned the EU against retaliating, quoting that “whatever the number you choose to raise them by … will be added onto the 30%.”
- The EU Commissioner von der Leyen responded on Sunday. An official statement was published on the European Commission’s press corner, which read, “We remain ready to continue working towards an agreement by August 1. At the same time, we will take all necessary steps to safeguard EU interests, including the adoption of proportionate countermeasures if required.”
- Speaking to NBC News on Thursday, Trump also warned of broader action, stating: “We’re just going to say all of the remaining countries are going to pay, whether it’s 20% or 15%. We’ll work that out now.”
- The US will release the Consumer Price Index (CPI) data for June on Tuesday, providing additional insight into whether tariffs are being reflected in prices. With the Federal Reserve (Fed) closely monitoring tariff risks, this report has a direct impact on monetary policy expectations.
- China’s Q2 Gross Domestic Product (GDP), Industrial Production, and Retail Sales for June are also scheduled for release on Tuesday. Any disappointments reflecting a significant slowdown in economic activity will likely continue to underpin the upside momentum for Gold.
Gold technical analysis: XAU/USD breaks triangle resistance, $3,400 in focus
Gold has broken out of the triangle pattern on the daily timeframe, suggesting a shift in momentum.
The move above the upper trendline and the 20-day Simple Moving Average (SMA) near $3,340 signals growing bullish pressure.
Current price action is testing the 23.6% Fibonacci retracement of the April low-high move, around $3,371, which is closely aligned with the current intraday high.
Gold (XAU/USD) daily chart
If XAU/USD can sustain a close above this zone, the next upside target is the psychological barrier at $3,400.
A clear break of this level could open the door for the June high of $3,452, bringing the April record high near $3,500 back in sight.
On the downside, a move below the 50-day SMA at $3,327 would bring the $3,300 psychological support level back in focus.
With the Relative Strength Index near 56, momentum is trading with a bullish bias. However, there is still room for prices to proceed higher before the market enters overbought territory.
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.
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