Introduction to the Gold Market
The gold price has experienced a rollercoaster ride this week, with US President Donald Trump’s tariff decisions creating uncertainty across various sectors globally. The yellow metal started the week at around $3,020 per ounce but quickly fell below the $3,000 level as global markets took a hit.
The Reason Behind Gold’s Fall
Although gold is considered a safe-haven asset, it’s common for it to decline in tandem with other assets during widespread downturns. The idea is that gold won’t drop as hard and will recover more quickly. Gary Wagner of TheGoldForecast.com explained that gold’s decline shouldn’t be concerning for investors. According to him, the massive liquidation that occurred was either to liquidate profitable positions to cover margin calls or to get more into cash.
Gold’s Rebound
Wagner’s advice not to worry about gold’s pullback was prescient, as the precious metal rebounded by Wednesday, April 9, and notched another fresh all-time high on Thursday, April 10. It continued moving upward on Friday, April 11, breaking $3,200 and setting another price record. Gold’s midweek rebound came after Trump’s turnaround on tariffs, where he announced a 90-day pause on "reciprocal" tariffs for most countries.
Tariff Exceptions
China is an exception, with Trump boosting its rate to 125 percent after the Asian nation announced further retaliatory tariffs against the US. Canada and Mexico are also exceptions, with most goods from these countries already subject to 25 percent tariffs. Blanket 25 percent tariffs on cars and car parts, as well as steel and aluminum, have also not been affected.
Market Reaction
The reversal from Trump came after White House officials put increasing pressure on him to change course, with worries about a selloff in US government bonds raising alarm bells. Major US indexes rebounded strongly once Trump announced his decision, and although they had given up some gains by the end of the week, they still finished the period in the green.
Gold’s Prospects
Many experts agree that gold’s prospects still look bright, even as it trades at all-time highs. Will Rhind of GraniteShares explained that the M2 ratio, which is the money supply divided by the price of gold, is a scary chart. According to him, when the ratio is high, it typically means that gold is overvalued, and when the ratio is low, it typically means that gold is undervalued. Currently, the ratio is below the median, indicating that gold is closer to being undervalued rather than overvalued.
Conclusion
In conclusion, the gold price has experienced a tumultuous week, with its price fluctuating in response to Trump’s tariff decisions. Despite the uncertainty, many experts believe that gold’s prospects still look bright, with its price expected to continue rising. As the global economy continues to evolve, it’s essential to keep a close eye on the gold market and its reaction to changing economic conditions.
