Gold Surges 24% to Record High as Dollar Weakens, Fed Cuts Loom

On the evening of April 11, U.S. stocks experienced a slight decline during the early trading session. The market has been volatile throughout the week, but all three major indices are poised to end the week with gains. The escalating trade tensions have reignited concerns about a potential U.S. economic recession, shaking investor confidence in American assets.

The U.S. Labor Department's release of the first monthly price drop in five years has further indicated that demand is weakening amid fears of a recession due to tariffs. This has led financial markets to anticipate that the Federal Reserve may cut interest rates by 100 basis points this year.

The dollar index (DXY) has been in a broad decline, falling below 99.90 to reach a three-year low. Persistent concerns about the global and U.S. economic outlook have intensified selling pressure on the dollar. The U.S. March inflation data, which came in below expectations, has further strengthened market expectations that the Federal Reserve may begin cutting rates as early as June. The consumer price index (CPI) year-over-year growth rate fell to 2.4%, below the expected 2.6% and February's 2.8%. The core CPI, excluding food and energy prices, grew 2.8% year-over-year, also below expectations. On a monthly basis, the overall CPI decreased by 0.1%, while the core CPI rose slightly by 0.1%.

The escalating global trade tensions and a weakening dollar have driven up the price of gold, which has surged to a new historical high of $3,237.66 per ounce during the European trading session on April 11. Despite a slight pullback to the $3,220 range before the U.S. market opened, gold prices have maintained their strength.

The technical analysis indicates that gold prices have formed a clear upward channel since hitting a low of $2,956. The current price is in the upper part of this channel, with strong upward momentum. The MACD indicator shows a widening gap between DIFF (42.45) and DEA (38.71), with a MACD value of 7.49 and expanding bars, indicating strong upward momentum. The RSI indicator is at 70.25, in the overbought zone but without any divergence signals. The Commodity Channel Index (CCI) is at 94.95, also at a high level but without any clear top divergence, suggesting a healthy upward trend. The recent series of large bullish candles, combined with minor pullbacks, indicates that the bulls are in control, especially after the long bullish candle on April 10 broke through previous highs and set a new high on April 11, confirming the breakout.

From a longer-term perspective, gold prices have been in a stable upward trend since the beginning of the year, rising from $2,583.01 to around $3,220, an increase of over 24%. The daily moving averages MA55 ($2,951.76), MA14 ($3,081.18), and MA200 ($2,687.62) are in a clear bullish alignment, with prices running above all major moving averages, indicating a strong medium to long-term trend. The daily MACD indicator shows DIFF (48.73) and DEA (43.04) at high levels, with a positive MACD value (11.38). The RSI indicator is at 69.96, approaching but not yet in the severely overbought zone. The CCI indicator is at 173.73, also at a high level but continuing to rise with new highs in price, without any top divergence. The price broke through the previous high of $3,130 and set a new high at $3,237.66, followed by a minor pullback but remaining above $3,200, indicating limited upward pressure. Technically, $3,175 will be an important support level, while $3,250 will be the primary short-term resistance.

In the short term, gold prices are expected to remain strong. The dollar index hitting a three-year low provides strong support for gold prices. The escalating global trade tensions have increased market risk aversion, enhancing gold's appeal. Technically, gold prices are running within an upward channel, with $3,175 as a key support level. As long as this level holds, gold prices are expected to continue challenging the $3,250-$3,300 range.

The lower-than-expected U.S. inflation data has reinforced market expectations of multiple rate cuts by the Federal Reserve this year. A rate-cutting cycle typically benefits gold by lowering the opportunity cost of holding it. If market expectations for Fed rate cuts strengthen further, gold prices could continue to rise, potentially challenging the $3,500 psychological level by the end of the year.

Despite the short-term dominance of bulls, gold prices are at historical highs, and potential downside risks cannot be ignored. The RSI and CCI indicators are at high levels, approaching the overbought zone, suggesting a possible short-term technical correction. If trade tensions ease or Fed officials make hawkish comments, gold prices could fall. From a medium to long-term perspective, if U.S. inflation data continues to improve, the Fed delays rate cuts, and the dollar stabilizes or rebounds, this could put pressure on gold prices. Additionally, if major central banks around the world sell off large amounts of their gold reserves, this could also drive gold prices down. In such a scenario, gold prices could retrace to the $3,100-$3,000 support range, or even test the lower channel boundary at $2,950. However, considering the ongoing global economic uncertainty and geopolitical risks, a significant drop in gold prices is unlikely. The market will closely monitor the Federal Reserve's policy direction, inflation data, and trade negotiations as key indicators for determining the future direction of gold prices.