Gold Slips Below $3,030 as Powell’s Inflation Warning, Trade War Tensions, and Margin Calls Rattle Markets

Gold (XAU) prices extended their losses on Friday, falling to a seven-day low of $3,015 before slightly recovering to trade around $3,029, marking a 2.70% decline. The sharp drop followed a speech by Federal Reserve Chair Jerome Powell, in which he cautioned that inflation could accelerate due to rising tariffs. His remarks signaled a more cautious stance from the Fed regarding future rate cuts, impacting investor sentiment and pressuring gold prices.

Trade War Escalation and Margin Calls Deepen Market Volatility, Stir Recession Fears

Ongoing tensions from the US-China trade war continued to rattle financial markets, further fueled by Powell’s comments on the potential economic consequences of tariffs—namely, slower growth and higher inflation. Additionally, the Financial Times reported that hedge funds experienced the biggest margin calls since the COVID-19 crisis.

According to Standard Chartered analyst Suki Cooper, gold is often used as a liquid asset to cover losses during risk events, which can lead to sell-offs even in traditionally safe-haven assets like gold.

Despite recession fears triggered by the inverted yield curve—where the 3-month yield surpassed the 10-year by 25 basis points—US economic data painted a mixed picture. A robust jobs report showed over 200,000 new hires in March, with the unemployment rate nudging up slightly from 4.1% to 4.2%. Bloomberg suggested this uptick was negligible. Meanwhile, money markets reflected expectations of over 1% in Fed rate cuts by 2025, highlighting uncertainty in the economic outlook.

Dollar Strength and Market Signals Intensify Downward Pressure on Vulnerable Gold Prices

Gold’s decline was also influenced by a rally in the US Dollar Index (DXY), which surged by 1.14% to 103.09. The strengthening dollar, along with a slight drop in US Treasury yields, pressured bullion prices. Powell reiterated that monetary policy remains appropriate and emphasized uncertainty in the economic outlook. He acknowledged the potential for tariffs to raise inflation, with possibly persistent effects in the upcoming quarters.

From a technical standpoint, gold appears vulnerable, currently trading below the $3,050 mark. The Relative Strength Index (RSI) shows signs of weakening momentum and may soon fall below neutral territory. If gold closes below the $3,000 level, it could test support at the 50-day Simple Moving Average of $2,937, and potentially the $2,900 level. However, if buyers regain strength, a break above $3,100 would be essential to shift momentum back in favor of bulls.