(Kitco News) - The world’s financial markets are experiencing a massive deleveraging move which is also sweeping through precious metals, as President Donald Trump’s trade tariffs have destabilized global trade and threaten to trigger a global recession.
Gold prices are ending the week testing support just above $3,000 an ounce, bringing a five-week winning streak to a close. Spot prices last traded at $3,023 an ounce, down 2% from last Friday, and the precious metal is down nearly 4.5% from Thursday night’s all-time highs.
However, gold is still significantly outperforming equity markets, as the S&P 500 is on track to end the week down nearly 500 points, or 8.7% from last Friday. The broad market index is experiencing its worst week since the global economy was shut down during the COVID-19 pandemic.
Chris Vecchio, Head of Futures Strategies and Forex at Tastylive.com, said it is not surprising equities are seeing such a significant selloff, as Trump’s global tariffs represent the biggest disruption to global trade in 100 years.
Although gold is down, Vecchio said it is important to recognize that it is doing its job by outperforming equity markets.
“I would be down a lot more if it wasn’t for my gold and bond holds,” he said. “We are in a cash-raising environment, so everything is going to get sold, but I do think gold is going to do well on the other side of this.”
Despite rising volatility in gold, Vecchio said that the factors that drove prices above $3,000 an ounce remain firmly in place. Although he is not in any hurry to buy at the moment, he said that lower prices represent an attractive entry point.
“Long term, central banks will continue to diversify away from the U.S. dollar and into gold,” he said. “These tariffs have demonstrated that the U.S. has become an unreliable trade partner.”
David Morrison, Senior Market Analyst at Trade Nation, said that although gold’s sell-off has been more dramatic than expected, the move is not surprising, as momentum indicators showed prices were trading in overbought territory. However, he added that he doesn’t expect the rally to be over, even if prices fall lower.
“If gold can find some support around 3,000 or even 2,900 and consolidate, it could reset the MACD and provide a base for a fresh leg of the multi-year rally,” he told Kitco News.
Neil Welsh, Head of Metals at Britannia Global Markets, said he is not concerned about gold’s sell-off and doesn’t see a fundamental shift in the marketplace. He added that the rout in equity markets supports gold’s safe-haven narrative.
Welsh noted that in the current environment, gold has more than one path back to new record highs.
“If the Fed stays neutral, that gives gold a chance to consolidate or even climb,” he said. “If the Fed delays cuts and the economy starts to look fragile, then gold could catch a strong bid. At the moment, I find it difficult to see many plausible scenarios where gold sells off in a similar fashion to what we’ve seen across the markets in the past couple of days.”
Welsh’s comments come as Federal Reserve Chair Jerome Powell reiterated that the central bank remains in no hurry to cut interest rates, even as equity markets continue to free-fall.
Speaking at the Society for Advancing Business Editing and Writing Annual Conference in Arlington, Virginia, Powell noted that the labor market remains fairly healthy and inflation risks continue to rise.
“We will continue to carefully monitor the incoming data, the evolving outlook, and the balance of risks. We are well-positioned to wait for greater clarity before considering any adjustments to our policy stance. It is too soon to say what will be the appropriate path for monetary policy,” he said in his opening remarks.
Analysts have said that the Federal Reserve’s neutral stance is negative for gold, as it supports higher bond yields and a stronger U.S. dollar.
Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, said that while he believes gold has room to move lower, he is not ready to bet against the precious metal.
“I wouldn’t bet against gold long-term—geopolitical tensions and inflation fears are still very much in play, which could limit any sustained downside,” he said. “I see gold as a buy on the dip, particularly if we get a pullback to those key levels like $3,000. Uncertainty isn’t going anywhere—trade wars, central bank policies, and geopolitical risks are all supportive.”
Looking ahead to next week, analysts said that inflation data could add further volatility to gold prices, as it is expected to remain elevated while consumers adjust to higher prices due to the earlier tariffs.
Economic data to watch next week:
Wednesday: FOMC minutes from the March monetary policy meeting
Thursday: US CPI
Friday: US PPI, University of Michigan preliminary consumer sentiment survey
