Buying gold with target at 3,500 amid ongoing trade conflicts and potential Fed politicization

On Monday, gold updated its all-time high, growing above $3,385. The price is rising amid persistent uncertainty driven by US President Donald Trump’s trade policies and fears for the independence of the Federal Reserve (Fed). The opening price was $3,331.73 on Monday.  

The US dollar hit a three-year low due to the country’s worsening economic outlook. The increasing risks of recession force investors to pull capital out of US assets, making dollar-quoted gold more attractive to buyers from other countries.

On Monday, gold was supported by the trade conflict between the US and China escalating over the weekend. Trump ordered a review of new import duties on key minerals from China, a leader in the industry. In response, China has apparently decided to stop buying Boeing airplanes. According to Reuters, the company's second airliner is already on its way back to the US.

The dollar is also weakening due to the risks of Fed politicization. Reuters reports that White House economic advisor Kevin Hassett has confirmed that the Trump’s administration is considering removing Fed Chair Jerome Powell. This shatters investor confidence and adds to capital outflows from the US. 

In general, a weaker US dollar and increased demand for safe haven assets are supporting gold. Besides, apart from private buyers, central banks have been showing interest in the yellow metal. 

With no important statistics due this week, the news on trade confrontations will be in the spotlight.

The technical data shows an uptrend with the possibility of a short-term correction. The RSI is 67, being in the upper part of the neutral zone, which indicates an uptrend in the gold market.

The MACD indicator shows strengthening bullish momentum. The difference between the main line and the signal line is increasing, and the indicator itself is positive.

The level of $3,400 is to be observed. After consolidating the level, the price will be able to continue rising up to $3,500. Yet, a pullback may offset the growth, and the price will fall to $3,300.

Current recommendation:

Buy at the current price. Take profit – 3,500. Stop loss – 3,300.