Gold Price Forecast: Bulls back Gold as tensions between the US and China rise
- Gold trades in the green as US-China tensions boost demand for safe havens.
- The US Dollar weakens amid additional tariff threats.
- Gold prices recover above $3,350, adding over 2.50% for the day, at the time of writing.
Gold prices are trading positively on Monday, driven by market uncertainty and an increased demand for safe-haven assets.
Market sentiment has turned cautious due to a series of developments, including US President Donald Trump’s intention to double tariffs on steel and aluminium from 25% to 50%. The growing tariff threats and escalating trade tensions have posed a significant risk to risk assets, while a weaker US Dollar has been supportive of Gold prices.
Tensions between the US and China have also intensified, with Beijing pushing back against Trump's accusations that it violated a trade agreement reached in Geneva.
Gold daily digest: Trump tariffs, US-China trade wars come back in focus
- In his post on Truth Social on Friday, Trump stated:” China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US. So much for being Mr. NICE GUY!”
- The Geneva deal had established a 90-day pause on escalating tariffs between the two nations, with the US reducing tariffs on Chinese goods from 145% to 30%, and China lowering tariffs from 125% to 10%. The agreement also included provisions for China to lift restrictions on the export of critical minerals essential to US industries.
- In response to Trump's accusations, China's Ministry of Commerce labelled them as "groundless" and asserted that the US had introduced several "discriminatory restrictive measures," including export control guidelines for AI chips, a sales ban on chip design software, and the revocation of Chinese student visas. China emphasized its commitment to safeguarding its legitimate rights and interests and vowed to take "resolute and forceful measures" if the US continued its actions.
- With the US Dollar under renewed pressure, increased demand for safe havens could see Gold prices continue to receive a positive boost from the shift in sentiment.
Gold technical analysis: XAU/USD tests trendline resistance
Gold prices are currently testing the upper bound of the symmetrical triangle, providing resistance around the critical psychological level of $3,350.
The 20-day Simple Moving Average (SMA) is holding near $3,295, just below the $3,300 psychological level.
A 2% price increase in today’s session so far has allowed prices to adopt a bullish tone, reflected by an uptick in the Relative Strength Index (RSI), which has risen to 57.
For the next significant move, a clear break of trendline resistance could see prices retest the May high near $3,431, potentially opening the door for a retest of the April 22 all-time high of $3,500.
If prices fail to remain upbeat, a move below $3,300 could see Gold prices move back toward the 23.6% Fibonacci retracement level of the January-April move, near $3,291, and toward the 38.6% Fibonacci level of that same move at $3,161.
Gold daily chart
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
Author
Tammy Da Costa, CFTe®
FXStreet
Tammy is an economist and market analyst with a deep passion for financial markets, particularly commodities and geopolitics.
