In recent months, the heightened demand for safe haven assets has been a key bullish driver for gold and its derivatives. Investors are increasingly rushing to hedge their wealth against risks in the form of geopolitical risks, economic uncertainties, and jitters over Trump’s tariffs.
Besides, the US dollar remains on a downtrend ahead of the Fed meeting. Investors will be keen on the central bank’s tone regarding the rate outlook. This includes Powell’s assertions on key indicators like employment, inflation, and the overall economic health.
On Tuesday, SPDR Gold Shares ETF (GLD) hit a fresh all-time high at $276.73; overtaking last week’s record high of $275. So far, it has been up by 13% year-to-date, adding to the 27% gains recorded in 2024.
Read more: What is ANZ’s gold price forecast for the next 3-6 months?
Inflation data points to more leeway for Fed’s rate cuts
The rallying of gold price to a fresh all-time high comes just a few days after data from the US Department of Labor showed that the US inflation eased more than expected in February. Notably, this is the first time in four months that inflation has cooled.
The released data showed that the US CPI rose by 0.2% in February compared to the previous month’s 0.5%. At an annualized rate, the index was up by 2.8% after increasing by 3.0% at the start of the year. Analysts had predicted that the CPI would surge by 0.3% for the month and 2.9% year-on-year.
However, the improvement is likely temporary. As President Trump continues with his aggressive tariffs on various US imports, the cost of most consumer goods is expected to increase in the coming months.
Subsequently, investors are increasingly betting on the Federal Reserve to lower interest rates in the coming months. More specifically, most expect the central bank to lower rates a little over two times before the year ends. GLD gold ETF tends to thrive in an environment of lower interest rates as the opportunity cost of holding the non-yielding bullion is lower.
Read more: Here’s why the GLD ETF is surging and what to expect
Trump’s trade policy tests the dollar in favor of gold prices
While the US dollar is also considered a conventional safe haven, concerns over a probable recession in the leading economy have been weighing on the greenback. On Tuesday, the dollar index, which tracks the value of the greenback against a basket of six major currencies, retested the 5-month low hit a week ago at $103.25. A lower US dollar makes gold less expensive for buyers with foreign currencies.
Notably, fears of a US recession have detented the consumer sentiment as the two-day Fed meeting commences on Tuesday. In the subsequent FOMC statement, investors do not expect change in the current interest rates. The central bank has to be cautious of cutting rates amid the heightened inflation expectations.
Even so, the market will be keen on the bank’s tone and its view on the impact of Trump’s trade policy on the economy. According to most investors, softening their hawkish tone is now just a matter of timing.
GLD ETF technical analysis
GLD chart by TradingView
The weekly chart shows that the GLD ETF stock has been in a strong bullish trend for a long time and now sits at a record high. Its surge is in line with our previous GLD forecast, in which we cited the forming bullish pennant pattern.
GLD remains above the 50-week and 100-week Exponential Moving Averages (EMA), a bullish sign. Also, the MACD, Relative Strength Index (RSI), and the Stochastic Oscillator have continued rising. Therefore, the fund will likely keep soaing as bulls target the key point at $300.
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