Gold Plunges Below $3,000 as Dollar Strength and Tariff Fears Grip Markets

Gold prices experienced a sharp decline on Monday, breaching the critical $3,000 mark to reach their lowest level since mid-March. The precious metal’s woes were fueled by a resurgent US Dollar and escalating concerns over a potential global recession sparked by intensifying trade tensions between the United States and China.

The “King Dollar” regained its footing after hitting a six-month low last week, bolstered by US President Donald Trump’s reaffirmation of reciprocal tariffs. This move was met with swift retaliation from China, which imposed a 34% duty on all imports from the US, sending ripples of unease through global financial markets and triggering losses across major equity indices. Initial hopes of a potential 90-day pause in tariffs, briefly floated by a White House advisor, were quickly dashed as the Trump administration dismissed the report as “fake news,” according to CNBC.

Adding to the downward pressure on bullion was the rise in US Treasury yields, with the benchmark 10-year note climbing nearly fifteen basis points to 4.147%. This increase in yields further strengthened the US Dollar, as reflected in the US Dollar Index (DXY) which rose by 0.39% to 103.29. The inverse relationship between the dollar and gold often sees the precious metal become less attractive to investors when the dollar strengthens.

Looking ahead, investors are keenly awaiting a slew of key US economic data this week, including the Federal Open Market Committee (FOMC) meeting minutes on Wednesday, followed by the release of consumer and producer inflation figures. These data points will be crucial in assessing the future trajectory of inflation and the likelihood of Federal Reserve interest rate cuts, which have become increasingly uncertain amidst the current economic climate. Notably, recent comments from Fed Governor Adriana Kugler highlighted the potential “consequential” impact of tariffs on inflation, with some price increases already being observed.

Underlying the market jitters are growing fears of a recession, as evidenced by the inversion of the US 10-year to 3-month yield curve, where the shorter-term yield is currently paying a premium over the longer-term yield – a phenomenon often seen as a recessionary indicator.

From a technical perspective, gold’s sharp drop below $3,000 indicates strong selling pressure. The Relative Strength Index (RSI) has turned bearish, suggesting the potential for further consolidation around the 50-day Simple Moving Average (SMA) near the $2,942-$3,000 range. A break below this level could pave the way for a move towards the $2,900 mark, followed by the 100-day SMA at $2,801. Conversely, a rebound above $3,000 could see buyers testing the $3,050 level.