Gold Hits Record as Mounting Stagflation Fears and Trade War

• Trade Tensions Remain: Tariff measures from both nations could push total levies on some goods above 245%, adding to market uncertainty.

• Fed Stays Cautious: Powell signals rate cuts unlikely despite economic slowdown, citing inflation risks.

Market Summary

Global markets remained under pressure as escalating trade tensions between the US and China fueled investor anxiety, sending gold prices to fresh record highs. The US recently imposed a steep 145% tariff on Chinese imports, with limited exemptions for smartphones, while China retaliated with a 125% tariff on American goods. The White House further warned that total levies on some Chinese products could soar to 245% once existing duties are included. This intensifying trade war has raised concerns about stagflation, with Fed Chair Jerome Powell highlighting that tariffs are likely to drive inflation higher, yet current economic conditions do not justify a rate cut.

US equity markets fell sharply, reflecting fragile investor sentiment amid mounting fears of slowing economic growth and rising input costs. With the Fed maintaining a cautious stance and signaling no immediate plans for rate cuts, businesses may continue to struggle under the weight of higher material and borrowing costs. As company profit margins come under pressure, the outlook for US equities remains clouded by uncertainty, with stagflation risks denting investor confidence.

Meanwhile, the Japanese yen edged higher after constructive trade talks between the US and Japan, with Prime Minister Shigeru Ishiba emphasizing Japans prioritization of negotiations—an early sign of potential progress amid global trade friction.

Current rate hike bets on 7th May Fed interest rate decision:

Source: CME Fedwatch Tool

0 bps (81.6%) VS -25 bps (18.4%)

Market Movements

DOLLAR_INDX, H4

The Dollar Index remained flat, continuing to consolidate in a narrow range amid mixed market sentiment. On one hand, the Fed‘s reluctance to cut rates and concerns over inflation support the dollar. On the other, fears of economic slowdown and prolonged trade tensions cap its upside. Powell’s warning about stagflation risk and tariff-driven inflation has complicated the Feds policy path, adding uncertainty to dollar direction in the medium term.

The Dollar Index is trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 29, suggesting the index might enter oversold territory.

Resistance level: 101.95, 104.65

Support level: 99.25, 97.80

XAU/USD, H4

Gold prices hit a new record high, driven by escalating U.S.-China trade tensions and rising stagflation fears. President Trump imposed a fresh 145% tariff on Chinese goods, with some exemptions for smartphones, while China retaliated with tariffs of up to 125%. The White House noted total levies could reach 245% on select items. Fed Chair Jerome Powell added to market anxiety, warning that tariffs could fuel inflation but reiterated that cutting rates now may worsen stagflation. Amid this uncertainty, investors are flocking to gold as a safe-haven, seeking protection from inflation and economic slowdowns.

Gold prices are trading higher after successfully breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 75, suggesting the commodity might enter overbought territory.

Resistance level: 3380.00, 3490.00

Support level: 3290.00, 3220.00

GBP/USD，H4

The pound edged lower following weaker-than-expected CPI data, with headline UK inflation rising only 2.6% YoY (vs. 2.7% expected). The data reignited concerns over the UKs economic health amid ongoing global trade uncertainties. As inflation softens and broader growth risks increase, investor confidence in the pound remains shaky, especially without clearer direction from the Bank of England.

GBP/USD is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 60, suggesting the pair might extend its losses after breakout since the RSI retreated from overbought territory.

Resistance level: 1.3315, 1.3425

Support level: 1.3195, 1.3085

USD/CAD , H4

The loonie firmed modestly after the Bank of Canada held interest rates steady at 2.75%, in line with expectations. This marks the BoC's first pause after seven consecutive cuts, reflecting a cautious approach. The central bank emphasized the need for more data to assess the full impact of global tariffs and remains ready to act if inflation moves beyond control. For now, its neutral tone offered some short-term support for CAD.

USD/CAD is trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 34, suggesting the pair might enter oversold territory.

Resistance level: 1.4140, 1.4440

Support level: 1.3855, 1.3600