Gold Soars to Record Highs: Trade War Fears & Economic Uncertainty Fuel Market Volatility 02.04.2025

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Market Pulse: Gold Hits Record High Amid Tariff Tensions & Economic Uncertainty

April 2, 2025 | By Market Insights Team

🔥 Key Market Highlights

  • Gold surges to a historic high of $3,110 per ounce as investors flock to safe-haven assets amid escalating trade tensions.
  • US manufacturing contracts to a 4-month low, with the ISM index falling to 49.0 (below expectations of 49.5).
  • Oil prices remain stable above $71 per barrel despite Trump's threats to curtail Russian crude exports.
  • Natural gas prices drop nearly 3% due to record US production and milder weather forecasts dampening demand.
  • Treasury yields hit 5-month lows, with the benchmark 10-year yield sliding to 4.13%, reflecting recession fears.

📊 Market Sentiment Analysis

The current market sentiment indicates growing caution and a flight to safety:

  • 📈 Bullish: Gold, Chinese manufacturing
  • ⚔️ Neutral: Crude oil
  • 📉 Bearish: Natural gas, US dollar, US treasuries, Silver, Base metals

Investor behavior suggests a defensive stance as they assess the potential impact of impending US tariffs. The divergence between gold (bullish) and silver (bearish) signals a deeper risk-off sentiment rather than merely inflationary concerns.

💰 Gold's Record-Breaking Rally: What’s Driving It?

Gold has soared 19% over the past three months, reaching unprecedented levels due to several key drivers:

  • Intensified safe-haven demand ahead of US reciprocal tariff announcements.
  • Weakening US dollar following disappointing economic data.
  • Declining Treasury yields (10-year at 4.13%, the lowest in 5 months).
  • Growing recession fears amid manufacturing contraction and declining job openings.
  • Escalating global trade tensions under the Trump administration.

🔬 Technical Analysis:

  • Support: $3,100
  • Resistance: $3,150
  • Upside potential: $3,170 if resistance breaks
  • MCX Gold June futures: Expected to trade between ₹90,300 - ₹91,400, with a bullish breakout above ₹91,400 targeting ₹92,000.

⛽ Energy Market: Crude Holds Steady While Natural Gas Slumps

Crude Oil Outlook

  • WTI crude remains above $70 per barrel despite global concerns.
  • Supply tightness signals support, with increasing prompt spreads in WTI & Brent.
  • Refining demand growth evident from improving crack spreads.
  • Geopolitical risk premium due to US sanctions on Iranian oil & threats against Russian exports.
  • MCX Crude Oil April contracts: Support at ₹6,000, potential upside to ₹6,200.

Natural Gas Under Pressure

  • Prices declined nearly 3% to ₹340.8, with NYMEX falling over 4%.
  • Record US production levels continue to weigh on market sentiment.
  • Milder weather forecasts reducing seasonal demand.
  • MCX Natural Gas April contracts: Bearish trend toward ₹328, resistance at ₹354.

🏢 Base Metals: Mixed Performance Amid Economic Data Divergence

  • Copper gains 0.29% on stronger-than-expected Chinese PMI (50.5).
  • Aluminum falls 0.69% amid broader risk-off sentiment.
  • Zinc drops 0.80%, lead declines 0.31%.
  • LME inventory movements: Copper stocks +0.90%, Zinc stocks -1.23%.

Copper Price Outlook:

  • Risk-off sentiment limits upside potential.
  • Depleting LME stocks provide some price support.
  • US tariffs on copper create market uncertainty.
  • MCX Copper April contracts: Consolidation expected between ₹887 - ₹902.

🗓 Key Events to Watch This Week

Wednesday, April 2:

  • ADP Non-Farm Employment Change (forecast: 118k)
  • Factory Orders
  • US Crude Oil Inventories

Thursday, April 3:

  • US Unemployment Claims
  • ISM Services PMI
  • Natural Gas Storage Report

Friday, April 4:

  • Non-Farm Payrolls (forecast: 239k)
  • Unemployment Rate
  • Fed Chair Powell's Speech

💼 Investment Strategy Takeaways

Precious Metals

  • Gold: Profit-taking at $3,150, repositioning on dips to $3,100.
  • Silver: Maintain positions above ₹99,000, target ₹101,500.

Energy

  • Crude Oil: Buy near ₹6,050 - ₹6,060, targets ₹6,200, stop-loss ₹5,980.
  • Natural Gas: Sell in the ₹345 - ₹346 range, targets ₹330, stop-loss ₹354.

Base Metals

  • Copper: Neutral to bearish below ₹887.
  • Aluminum: Bearish outlook, downside to ₹242, resistance ₹248.
  • Zinc: Further weakness expected toward ₹265, resistance ₹270.

🔮 Market Outlook: Caution Prevails Amid Trade & Growth Concerns

With economic uncertainty mounting, gold’s surge signals deep investor anxiety. Meanwhile, falling Treasury yields highlight recession fears. Traders should closely monitor:

  1. US tariff announcements & trade policies.
  2. Key economic data releases, particularly employment figures.
  3. Central bank communications (Fed Chair Powell’s speech).
  4. Geopolitical developments affecting energy supplies.

As volatility persists, a balanced approach with strategic hedging remains crucial for navigating market uncertainties.

Disclaimer: This analysis is based on market research from ICICI Securities dated April 2, 2025. All investment decisions should be made after consulting a financial advisor. Past performance is not indicative of future results.

Sources: Bloomberg, Reuters, ICICI Direct Research

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