Gold Surges to Record High Amid Stagflation Worries and Intensifying 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.

*Equities Under Pressure: Stagflation fears and rising costs squeeze corporate margins and market sentiment.

Market Summary

Gold prices soared to all-time highs as global markets reeled from escalating trade tensions and growing fears of stagflation. Investor anxiety deepened after the United States imposed a hefty 145% tariff on Chinese imports, with limited exemptions such as smartphones. In retaliation, China responded with a 125% tariff on U.S. goods. The White House warned that combined tariffs on some Chinese products could eventually exceed 245%, further amplifying uncertainty in global markets.

Federal Reserve Chair Jerome Powell added to the cautious tone, signaling that interest rate cuts are unlikely in the near term. Despite signs of economic deceleration, Powell emphasized persistent inflationary pressures, suggesting that current conditions do not justify easing. This stance has heightened concerns that the economy may face stagflation—slowing growth coupled with rising prices.

U.S. equities tumbled as investors grew increasingly concerned about the economic outlook. Rising input and borrowing costs are expected to pressure corporate margins, particularly as the Fed holds its ground. With confidence weakening, the stock market faces heightened volatility and a clouded outlook.

In currency markets, the Japanese yen strengthened slightly following progress in trade negotiations between the U.S. and Japan. Japanese Prime Minister Shigeru Ishiba reaffirmed the country’s commitment to prioritizing talks with the U.S., offering a glimmer of optimism amid broader trade uncertainties.

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

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

Source: CME Fedwatch Tool

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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 Fed’s 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

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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 UK’s 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

Dow Jones, H4: 

The U.S. equity market came under pressure, posting a steep decline as investors digested both rising trade risks and a dimming economic outlook. With the Fed holding back on rate cuts, and inflationary pressures mounting, fears of stagflation are building. Corporate profit margins are under threat, weighed down by higher input costs and elevated borrowing rates, reducing investor appetite for equities in the near term.

The Dow is trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 42, suggesting the dow might extend its losses since the RSI stays below the midline. 

Resistance level: 40020.00, 41735.00

Support level: 38040.00, 36305.00

USD/JPY, H4: 

The Japanese yen gained modestly, buoyed by its safe-haven status and optimism over U.S.-Japan trade negotiations. Japan’s PM Shigeru Ishiba said talks were “constructive,” and President Trump confirmed “big progress” in discussions with a Japanese delegation. Japan is among the first to enter formal negotiations, marking an early test of Washington’s willingness to ease tariffs. Despite ongoing global uncertainty, BOJ’s longer-term hawkish tone continues to offer underlying support for the yen.

USD/JPY is trading lower following the prior breakout below the previous support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 33, suggesting the pair might enter oversold territory. 

Resistance level: 144.15, 147.40

Support level: 140.65, 137.45

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Crude Oil, H4

Crude oil prices rebounded slightly, helped by China’s better-than-expected GDP growth of 5.4% (vs. 5.2% forecast), signaling resilience in global demand. However, gains were limited by a bearish U.S. inventory report, with crude stocks rising by 0.515M barrels—more than the expected 0.400M—according to EIA data. While supply-side concerns persist, the broader economic uncertainty tied to trade wars remains a drag on oil’s upside potential.

Oil prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 56, suggesting the commodity might extend its gains after breakout since the RSI stays above the midline. 

Resistance level: 62.50, 64.45

Support level: 59.75, 57.00

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