The gold market is experiencing a price correction

On Friday, the gold market experienced a significant decline, loosing almost 1.6%. Nevertheless, on Monday gold prices started to recover, reaching $2892.15 per ounce. The recovery followed the most significant one-day drop in the last two months.

One of the volatility factors was President Trump's planned tariffs on automobiles, which are to take effect April 2. The measures were announced after the release of preliminary reports on import tariff options and create additional geopolitical uncertainty, which affects the gold market. 

The US inflation data was also released last week. High inflation undermined the expectations of the Federal Reserve rate cuts this year. This puts pressure on assets without dividends, such as gold, since investors begin to consider alternative investment options.

Additionally, according to the data from the Commodity Futures Trading Commission, investors lowered their optimistic bets on the metal to a four-week low.

Markets are starting to consider Trump’s tariff threats as a negotiating tool, which could delay implementation of the measures for weeks or months. However, the trade tension between the US and China supports interest in gold as a safe-haven asset. Economic uncertainty combined with inflation data puts additional pressure on the precious metals market, while general global trade uncertainty supports positive dynamics of gold prices.

Technical analysis shows that the prices are correcting. The MACD is above the signal line, indicating a bullish trend. However, the MACD bars started to decrease, which may be a sign of a weakening upward momentum. RSI is fluctuating around 80, indicating that the asset is overbought, and the correction that started earlier continues.

Current recommendation:

Sell at the current price. Take profit – 2850. Stop loss – 2942.58.