Gold Gains, Fed in Focus

Gold’s pace of gains so far in 2025 are already outstripping its run last year. Spot gold gained 26% in 2024 (approximately), and in less than three months this year it has managed to add another 15%. It may be a stretch to say that gold could maintain this pace of gains for the remainder of the year, but even if gold were to replicate the size of its gains from last year again in 2025, that would take it to around the $3300. This looks a viable target if financial market conditions continue to work in favour of gold. While trade, inflation and geopolitical uncertainty continue to prevail, this just plays to gold’s strengths. Spot gold was seen trading at $3032 in early Asian trading hours on Wednesday, ahead of support at $3012 and $2987. Next resistance level to watch is $3051. A potential risk to gold could be a rebound in the USD if that occurs.

Key central bank meetings will be occurring from the FOMC, Bank of Japan (BOJ) and Bank of England (BOE) this week. The policy preference from each of them may be to stand pat, and to wait and see how Trump’s tariff policy takes shape. April 2nd is a key date as this is when we will find out more about how reciprocal tariffs from the US will be applied, and how much negotiation has taken place behind the scenes regarding adjustment to existing tariff levels by the US’s trading partners. There is incentive for the likes of the EU and others to lower current tariffs on US goods to reduce the level of any reciprocal measures by the US.

Regarding the FOMC meeting, with no policy change expected, the focus will be on language and the board’s confidence or otherwise in the US economy’s ability to weather tariff-related economic shocks. Fed Chairman Jerome Powell’s most recent public remarks on the US economy were reasonably upbeat and investors will be looking to see if this mood is maintained given the uptick in market volatility this month.

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In FX, the Dollar Index (DXY) remains under pressure with various US administration officials unable to rule out the chance of a US recession occurring (including US Treasury Secretary Scott Bessent). The USD is unable to muster any momentum on fears over how trade wars could negatively impact the US economy. The DXY is lingering around the 103.30 level, ahead of support at 103.16 and below resistance at 103.55 and 103.68. If Fed Chairman Powell offers little hint of any imminent rate cut from the Fed this may lift the USD from a yield perspective. However, the USD continues to struggle against the euro in particular which has benefitted from Germany’s fiscal spending bill with the upshot being that the EURUSD rate is now within sight of potentially hitting the 1.10 level.

Competing forces in energy markets are making it difficult for the oil price to move out of its current range. On the one hand, increasing hostilities in the Red Sea and in Gaza have added a small element of risk premium back into the crude price, but this is largely offset by expectations of increased OPEC+ production next month and the possible lifting of Russian sanctions if a Russia-Ukraine peace dela eventuates. Currently WTI crude (US Oil) is trading at $66.64 (as of Wednesday morning) with support at $65.89 and resistance at $68.53 acting as a barrier to any run back towards the $70 level.

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Stock markets remain tentative at best due to the current unknowables relating to the April 2nd planned tariff rollout. In terms of the reciprocal tariffs, we don’t yet know how much middle-ground may be achieved between the US and its trading partners in between now and the beginning of April. As such, these tariff ‘blind spots’ are keeping markets second guessing about what both the international trade and economic landscape will look like next month and beyond.

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