Gold retreats from record highs, holds above $3,100 ahead April's tariff shock

NEW YORK (April 1) Gold prices retreated on Tuesday as traders booked profits, awaiting April 2’s Liberation Day in the US, an event in which President Donald Trump is expected to announce additional tariffs aimed at improving the trade deficit imbalance. The XAU/USD trades at $3,114, down 0.28%.

Market sentiment remains mixed as reflected by US equity markets. Investors are anticipating the release of the latest US tariffs on Wednesday with speculation that they will be universal and may reach as high as 20%, according to The Washington Post.

Bullion’s rally was halted on Tuesday despite traders remaining uncertain about the magnitude of the tariffs imposed.

The US economic schedule revealed data that presents a bleak economic outlook as evidenced by money market futures pricing in more than 78 basis points of interest rate cuts by the Federal Reserve (Fed).

Business activity in the US was mixed, according to data announced by S&P Global and the Institute for Supply Management (ISM). The former revealed expansion, while the latter hinted that business conditions are worsening as another round of tariffs looms.

Other data revealed that the labor market remains robust as the US Department of Labor reported a decrease in job openings.

In the meantime, recession fears in the US are growing. Goldman Sachs revealed that the odds of a recession in the United States (US) rose from 20% to 35%, primarily due to business and household pessimism about the outlook, as well as Washington's tolerance of a deeper economic slowdown.

The latest estimate from the Atlanta Fed's GDPNow model indicates that GDP for Q1 2025 is expected to contract by -3.7%, down from the  -2.8% estimate on March 28.

Ahead this week, the US economic docket will feature the ISM Services PMI, Nonfarm Payrolls (NFP) figures, and Fed Chair Jerome Powell's speech on Friday.

Daily digest market movers: Gold price treads water amid lower US yields

• The US 10-year T-note yield tumbles four basis points to 4.169%. US real yields edge down two bps to 1.832%, according to US 10-year Treasury Inflation-Protected Securities (TIPS) yields.
• The US ISM Manufacturing PMI fell sharply in March, dropping from 50.3 to 49.3, signaling contraction in the sector. The survey’s comments highlighted tariffs as a key factor contributing to weakness across multiple sub-components.
• The JOLTS report from the US Department of Labor showed that job openings decreased to 7.568 million in February, down from 7.762 million and missing the forecast of 7.63 million. Despite the decline, vacancies remained relatively steady.
• In contrast, S&P Global's Manufacturing PMI indicated modest growth, rising from 49.8 to 50.2, suggesting a slight rebound in factory activity.
• On the commodities front, major Wall Street banks including Goldman Sachs, Société Générale, and Bank of America have raised their Gold price forecasts. They now eye $3,300 as the next upside target, according to a report by Kitco.

FXStreet