Gold Price Forecast (XAUUSD): Will the Rise Continue Amidst the Escalating Trade War?

April 8, 2025 (Investorideas.com Newswire) Investorideas.com, rated as a top 100 investment website for investment issues market commentary from Rania Gule, Senior Market Analyst at XS.com - MENA

Gold prices are experiencing a clear recovery during the Asian session today, Tuesday, trading near the $3010 level, driven by renewed geopolitical and economic concerns that boost demand for safe-haven assets. Recent statements and decisions by Trump, particularly the imposition of comprehensive tariffs, have sparked renewed fears of a potential global trade war that could push the global economy into recession. In my opinion, this grim outlook is prompting investors to hedge by purchasing gold, especially after it touched strong support levels near $2956. Furthermore, the dollar's decline, due to expectations of an interest rate cut by the Federal Reserve, serves as an additional support factor for gold, as it is a non-yielding asset that performs better in a low-interest-rate environment.

From my perspective, the market continues to price in expectations of the Federal Reserve cutting interest rates several times throughout 2025, driven by weak economic data and concerns about the impact of protectionist trade policies. Statements from Federal Reserve officials, ranging from focusing on controlling inflation to warning of the consequences of a trade war, confirm the delicate balance between supporting growth and managing price pressures. However, gold might temporarily decline if markets experience a risk-on rally, especially with investors awaiting the Federal Reserve's meeting minutes and upcoming U.S. inflation data, which could reshape monetary policy expectations and directly influence the direction of both gold and the dollar.

Currently, gold continues its steady recovery after reaching its lowest level in a month at $2957, testing the $3000 level and stabilizing above it, amid active market movements. The big question remains: will gold maintain this momentum amidst the escalating trade war between the U.S. and China? This presents the greatest challenge for gold investors, as the market is witnessing significant volatility due to financial market shifts and geopolitical events.

In my opinion, gold prices will remain cautious, as several factors are influencing its movement. One of these factors is pressure on the U.S. dollar, which is facing renewed selling pressures. The dollar has declined while U.S. Treasury yields have failed to recover from their six-month lows, which increases gold's appeal as a safe-haven asset during times of uncertainty. If the dollar continues to lose strength due to geopolitical and trade pressures, we could see further upward movement in gold, especially if concerns grow about the intensifying trade war between Washington and Beijing.

China's efforts to increase lending and stabilize markets provide an additional boost for gold. These measures reinforce expectations that global markets may experience a period of relative stability, which could revive risk sentiment and alleviate pressure on the dollar. However, it's important to note that these efforts come amidst growing tensions between the world's largest economies, the U.S. and China, and the trade war is expected to continue influencing financial market movements, including the gold market.

Recent statements from China's Ministry of Commerce rejecting additional tariffs from the U.S. add complexity to the current stage of the escalating trade crisis. China has shown its willingness to respond to any escalatory steps, increasing the likelihood of trade tensions between the two countries. This escalation could reignite risk aversion, boosting demand for gold as a hedge against geopolitical risks. If these tensions continue, gold may see further increases as investors flock back to the precious metal.

Alongside these trade developments, another key factor influencing markets is the monetary policy of the U.S. Federal Reserve. Growing expectations that the Fed may resume interest rate cuts starting in May 2025, with anticipated total cuts of 130 basis points next year, is a key driver in market movements. As the likelihood of rate cuts increases, the dollar is likely to continue its decline, which will provide additional support for gold. If this scenario materializes, gold will likely maintain an upward trajectory as markets find themselves in an environment that strengthens demand for the precious metal.

However, despite this, gold buyers should remain cautious of potential market fluctuations due to global trade developments. Amid the trade escalation between the U.S. and China and the threat of new tariffs, the market could face additional pressures if no trade agreement is reached. If Trump follows through on his threat to impose an additional 50% tariff on Chinese imports to the U.S., tensions could rise further, deepening the uncertainty and boosting demand for gold as a haven.

I also believe that, in addition to trade tensions, there is a cautious economic outlook as the European Union prepares to impose retaliatory tariffs on U.S. imports. These complex global dynamics make the gold market one of the key options investors turn to for protecting their portfolios from rising risks. Therefore, gold remains at the forefront of attention, with a strong likelihood of rising amidst ongoing trade tensions and economic concerns.

Thus, I expect gold prices to continue their positive movements shortly, but this largely depends on how geopolitical and monetary crises evolve. If the dollar remains weak and trade tensions increase pressure on global markets, gold will likely remain in a strong position, with the potential to rise to higher levels, possibly reaching unprecedented levels if these conditions continue to affect global markets.

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