On Monday, as the tech route picks up, gold eases

 

·         Following a tumultuous weekend due to tariffs and deportations, gold recovered from its lows on Monday.

·         The Nasdaq is down more than 4% as US tech firms sell down on Monday.
Ahead of a new all-time high, gold diminishes.

Following a weekend full of headlines and a hectic week with the central bank's rate decision looming, the price of gold (XAU/USD) is currently trading below $2,770 on Monday. Over the weekend, markets realized why US President Donald Trump has loosened his use of tariffs. For instance, it seems that tariffs will be used as leverage against nations that reject deported US immigrants who are being returned to their home countries.

 

President Trump gave Columbia a preview of the strategy on Sunday when he imposed 25% emergency tariffs, with the possibility of a 50% increase within a week, since the nation disregarded his demands for deportations. The White House subsequently stated that Trump's proposed tariffs were "now on hold" and that "Colombia has agreed to all of President Donald Trump's terms, including unrestricted acceptance of all illegal aliens from Colombia returned from the US."

The European Central Bank (ECB) and the Federal Reserve (Fed) will make their policy rate decisions on Wednesday and Thursday of this week, respectively. The Nasdaq declines as a Chinese open source AI start-up unsettles markets and raises doubts about the high valuations of tech stocks like Nvidia.

Market movers for the daily digest: macro gets up

·         According to Kotak Securities Ltd., the precious metal's reputation as an alternative reserve asset continues to draw investors, and the outlook for gold is still favorable due to the robust demand from central banks, according to Bloomberg.

·         According to Reuters, gold fell as the US dollar (USD) increased after President Donald Trump decided not to impose the threatening tariffs on Colombia after the two nations came to an agreement on the repatriation of deported migrants.

·         For the next Federal Reserve rate decision, the CME FedWatch tool predicts that the policy rate will remain unchanged. The probability of a 25 basis point rate drop in the May rate decision is 43.8%, while the probability of no change is 45.4%.

Technical Analysis: Excessive Heat

 

President Donald Trump showed over the weekend how and when tariffs will be applied, which caused the gold price rally to stall and appear to be coming to a halt on Monday. As it became evident that President Trump is not lowering tariffs at all, this was sufficient to cause some market panic. Meanwhile, Gold had hit overbought levels in the Relative Strength Index (RSI) indicator in the daily chart, and could see some more selling pressure as of now.

A type of double top in November and December that was broken on January 21 is still the first line of support at $2,721. The second nearby support is $2,709 (low on October 23, 2024), which is just below that. Look for a full-swing sell-off and a plunge back to $2,680 if one of the aforementioned levels breaks.

On the other hand, gold is still within 1% of its present levels and might reach its all-time high of $2,790. A new all-time high will emerge once it surpasses that. Although some strategists and experts have scheduled calls for $3,000, $2,800 appears to be a solid place to start as the next upward obstacle.