Gold Rally Halts Following Exemption From US Tariffs. Forecast as of 08.04.2025
The exemption of gold from US tariffs on America’s “Liberation Day” was a cruel joke. Instead of extending its rally, the precious metal lost its main competitive advantage and plunged. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- The US has removed gold, silver, and copper from the blacklist.
- The metals collapsed as the arbitrage trade came to an end.
- The XAUUSD does not have enough strength to continue the bullish trend.
- Short trades can be opened if gold slides below $2,975.
Weekly Fundamental Forecast for Gold
The XAUUSD bubble burst on America’s “Liberation” Day. Gold and other metals were exempted from tariffs, triggering a bullion spillover from North America to Europe, contrasting with the rapid, nearly 20% rally since the beginning of the year. Arbitrage strategies have been rendered ineffective, contributing to the decline in precious metal prices. The question remains: what asset will assume its role?
Major banks and investment firms have offered various explanations for the XAUUSD rally. These include geopolitical factors, active purchases by central banks, capital inflows into ETFs after four years of outflows, fears of a recession, and falling US Treasury yields. However, they have not been the primary drivers of gold’s rise above $3,100 per ounce in previous years.
The primary catalyst for the XAUUSD rally was the perceived threat of the US imposing duties on imported metals. As a result, gold and copper reached new highs, and silver surged significantly. Investors were driven by both facts and rumors during this period. As a result, copper and silver sagged by 14% and 16% instead of the expected 5%, respectively. For copper, this was the worst two-day performance since 2011.
Gold, Copper, and Silver Price Performance
Source: Wall Street Journal.
Tariff concerns led to higher prices in New York compared to London, while arbitrage facilitated capital flows from Europe to North America, and gold stocks on the COMEX reached their highest levels since 1992. Conversely, Britain’s precious metal reserves were dwindling. In March, they increased by 372,000 ounces, marking the first increase since October. It appears that someone was aware of the tariff exemption.
Gold Holdings in London Vaults
Source: Bloomberg.
The rest of the world became aware of this development on April 2, after which the gold bubble burst. Premiums between New York and London diminished, arbitrage trading was discontinued, and precious metals began to return to their home countries.
Premiums for Silver
Source: Bloomberg.
Geopolitical factors or other drivers will merely help the XAUUSD to recover. It is highly likely that the level of $3,168 per ounce will persist as an all-time high for an extended period. In addition, unusual activity is emerging in the Treasury bond market. The rise in yields, which appears to be occurring without any clear catalyst, has led to speculation about the potential sell-off in Treasuries by non-residents. This is particularly notable in the context of a trade war between the US and China. If this is the case, the precious metal may plummet lower.
Weekly Trading Plan for Gold
In early April, the strategy of selling gold at $3,115 per ounce appeared to be a short-term approach. However, the correction risks have proven to be more protracted, and the correction may turn into a downtrend. Should the precious metal fail to hold its footing above $3,032, or in the event of a decline below $2,975, one may consider opening short positions.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of XAUUSD in real time mode
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