Gold prices benefit from a rebound in risk

On Friday (May 30),Foreign exchange swap during the Asian morning session, the price of spot gold experienced slight fluctuations, currently trading around $3314 per ounce. The previous day, gold prices underwent significant volatility, plummeting to a low of $3245.88, the lowest since May 20, before rapidly rebounding to a peak of $3330.92, eventually closing at $3317.59, reflecting a marked increase in market risk aversion.

The immediate driver of gold's rebound was market concern triggered by weak U.S. economic data and a new wave of uncertainty regarding the legal validity of Trump's tariff policies. Data from the U.S. Department of Labor showed that initial jobless claims increased by 14,000 to 240,000 for the week ending May 24, significantly exceeding expectations. This surge was mainly observed in Michigan, a major manufacturing hub, suggesting that Trump's trade policies might be backfiring on domestic employment.

In addition, corporate profit data was also bleak—U.S. corporate profits in the first quarter recorded the largest decline in four years, with the non-financial sector being a significant drag. Against this backdrop, expectations for an early Federal Reserve rate cut have increased rapidly, with the probability of a September rate cut rising from 60% to 84.4%. As a zero-interest asset, gold's appeal has thus been enhanced.

On the policy front, a recent ruling by the U.S. Court of International Trade found that Trump's executive order imposing tariffs on trade surplus countries was "beyond authority," with some tariff measures being temporarily halted. Although the White House quickly appealed and threatened to use other legal avenues such as the International Emergency Economic Powers Act, the uncertainty regarding policy direction has clearly intensified.

This "tariff legal battle" has caused a rapid reaction in the financial markets: the U.S. dollar index fell by 0.5%, Asian stock markets showed short-term strength, and gold emerged as the biggest winner. As global risk-averse funds reevaluate the risk of U.S. assets, gold is gradually regaining favor.

Meanwhile, policy divergences have also appeared within the Federal Reserve. The minutes from the May meeting revealed that some officials expressed concern over the economic outlook, leaning towards a "pro-growth" stance, while others emphasized persistent inflationary pressures, presenting a "stagflation dilemma." The market broadly believes that if the Federal Reserve ultimately chooses to cut rates while inflation remains stubborn, real interest rates will further decline, opening a new upward path for gold.

An independent metal analyst commented, "Cracks in the labor market are emerging, and if economic data continues to weaken, the Federal Reserve may have to act earlier, undoubtedly benefiting gold."

Looking ahead, the key support level for gold prices in the short term is around $3270, and if it breaks through the $3330 resistance, it may challenge the $3400 mark. Investors should also closely monitor the upcoming U.S. PCE Price Index, as this data is considered one of the Federal Reserve's most watched inflation indicators and will be a core signal in determining future policy directions.

Overall, gold is at the heart of a storm created by "Trump premiums" and "easing expectations," and its future trajectory will depend on the course of trade policies, changes in the Federal Reserve's stance, and economic fundamentals. Amid the short-term turmoil, gold's role as a safe haven is being reactivated, with the market waiting for the next catalyst to emerge.

Risk Warning and Disclaimer

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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