Gold Hits Two-Week High as Tariff Fears and Fed Watch Grip Markets

Gold is roaring back, climbing 2.9% to $3,431.14 per ounce on Tuesday, May 6, 2025, its highest since April 22. Fueled by China’s post-holiday buying spree and jitters over looming US pharmaceutical tariffs, the yellow metal is defying a struggling US Dollar. With the Federal Reserve’s policy decision looming, investors are on edge. Here’s why gold is surging, what’s driving the rally, and where it’s headed next.

China’s Return and Tariff Tensions Spark Demand

China’s markets, reopening after the May 1-5 Labor Day holiday, unleashed a wave of gold buying, amplifying demand in the world’s top consumer market. President Donald Trump’s Monday announcement of planned tariffs on pharmaceutical imports within two weeks, following Sunday’s 100% duties on foreign films, has heightened market unease. These trade moves, stoking fears of economic disruption, are driving investors to gold as a hedge against uncertainty, pushing US gold futures up 3% to $3,422.80.

Dollar’s Woes Boost Gold’s Appeal

The US Dollar is faltering as hopes for swift US trade deals fade, making gold cheaper for holders of other currencies. Central banks, eager to reduce exposure to Dollar-based assets, are adding fuel to the rally. Despite April’s robust ISM Services PMI of 51.6 and Nonfarm Payrolls of 177,000, the Dollar’s slide reflects market frustration with trade policy gridlock. This dynamic has propelled gold, a zero-yield asset, even as US 10-year Treasury yields tick up to 4.35%.

Fed’s Rate Hold Looms Large

The Federal Reserve, led by Chair Jerome Powell, is expected to keep rates at 4.25%-4.50% at its May 6-7 meeting, with markets fully pricing in a hold. Powell’s press conference will be scrutinized for hints on future rate cuts, as higher rates typically dim gold’s allure. April’s sticky Prices Paid Index at 65.1 suggests persistent inflation, reinforcing the Fed’s cautious stance. Yet, gold’s surge signals that tariff-driven uncertainty is outweighing interest rate pressures for now.

Precious Metals and Market Outlook

Gold’s rally isn’t alone—silver climbed 1.9% to $33.10, platinum jumped 2.4% to $982.52, and palladium soared 3.1% to $971.27. Technicals point to further upside, with gold eyeing $3,500 and potentially $4,000 this year if trade fears escalate. Support holds at $3,300, with resistance at $3,450. Upcoming PMI and trade talk developments will shape the path. For now, gold’s dazzling climb screams opportunity, but the Fed’s signals and Trump’s tariff plans could spark sharp swings.