Will Gold Surge to $3400 Amid Global Tensions and Tariff Threats?

Gold prices have soared to a four-week high, driven by escalating geopolitical risks and renewed trade tensions. The XAU/USD pair climbed to $3,377, up 2.70%, as investors sought the safe-haven asset amid uncertainty. This rally, sparked by the Russia-Ukraine conflict and U.S. tariff policies, underscores gold’s enduring appeal in turbulent times. Three key factors—geopolitical unrest, trade disputes, and monetary policy shifts—are fueling this surge, with implications for markets and investors alike.

Geopolitical Risks Ignite Safe-Haven Demand
The Russia-Ukraine conflict has intensified, with Ukraine’s recent aerial attack destroying Russian military assets. This escalation has rattled global markets, pushing investors toward gold as a hedge against uncertainty. Historically, geopolitical flare-ups, like the 2014 Crimea crisis, have driven similar gold rallies, but today’s complex global landscape—marked by energy supply concerns and NATO involvement—amplifies the stakes. Continued tensions could sustain gold’s upward trajectory, with prices potentially testing $3,400 soon.

Trade Tensions and Tariff Hikes Stir Markets

U.S. President Donald Trump’s decision to raise steel and aluminum tariffs to 50%, effective June 4, 2025, has reignited U.S.-China trade tensions. This move, coupled with sharp rhetoric against China, has triggered a risk-off mood, dragging U.S. equities lower. Reports suggest a possible dialogue between Trump and China’s President Xi Jinping, but uncertainty persists. The 2018-2019 trade war saw gold prices rise nearly 20% as investors fled riskier assets. A similar dynamic appears at play now, with gold benefiting from market jitters. Critics argue tariffs could disrupt global supply chains, yet supporters claim they protect domestic industries. Regardless, gold stands to gain as a safe bet.

Monetary Policy and Economic Data Add Fuel

Federal Reserve Governor Christopher Waller has signaled openness to rate cuts later in 2025, while emphasizing inflation control. This dovish stance has weakened the U.S. Dollar Index (DXY), which fell 0.72% to 98.71, boosting gold’s appeal. Meanwhile, May’s ISM Manufacturing PMI dipped to 48.5, signaling contraction, though improvements in employment metrics offer some optimism ahead of Nonfarm Payrolls data. The Atlanta Fed’s GDPNow estimate for Q2 2025 jumped to 4.6%, suggesting robust growth. However, rising U.S. 10-year Treasury yields at 4.458% could cap gold’s gains, as higher yields typically dampen non-yielding assets. Money markets project 51 basis points of easing by year-end, supporting gold’s bullish outlook.

Looking Ahead: What’s Next for Gold?

Gold’s technical outlook remains strong, with XAU/USD breaking past $3,370 and eyeing $3,400. The Relative Strength Index indicates growing buyer momentum. A sustained move above $3,400 could target the May 7 peak of $3,438, with $3,500 in sight. Conversely, a drop below $3,300 might signal a bearish turn, with support at $3,250 and the 50-day SMA at $3,228. Investors should monitor geopolitical developments, trade policy shifts, and upcoming economic data, particularly Nonfarm Payrolls, to gauge gold’s next move. Bold action from policymakers, like coordinated de-escalation or clearer Fed guidance, could stabilize markets—but until then, gold’s shine seems set to endure.