Gold Soars to Two-Week High Amid Fed Uncertainty and Trade Tensions

The price of gold surged to a two-week high on May 6, 2025, reaching $3,380.92 per ounce, driven by escalating U.S.-China trade tensions and anticipation of the Federal Reserve’s policy decision. Safe-haven demand surged as investors sought refuge from geopolitical risks and mixed economic signals, with the Fed’s upcoming meeting on May 6-7 intensifying market volatility.

Key Drivers of the Rally

1. Trade Tensions: U.S. President Donald Trump’s announcement of a 100% tariff on foreign-produced films and threats of pharmaceutical tariffs heightened global uncertainty. These moves deepened existing trade disputes, pushing investors toward gold as a crisis hedge.
2. Fed Policy Uncertainty: With the Fed’s May meeting on the horizon, traders speculated on potential dovish signals or rate cuts. highlighted expectations of a cautious stance amid conflicting data, including a shrinking GDP and flat core PCE.
3. Dollar Weakness: The U.S. dollar index fell to a three-year low, boosting gold’s appeal for international buyers. A weaker dollar reduces the cost of gold in other currencies, amplifying demand.
4. Geopolitical Risks: Conflicts such as Israel’s controversial land-seizure plan in Gaza added to global instability, further fueling safe-haven flows.

Regional Market Dynamics

• India: Gold June futures on the MCX rose 1.25% to ₹96,000 per 10 grams, with retail prices hovering around ₹9,574–₹9,589 per gram across major cities. Analysts at LKP Securities noted short-term volatility between ₹93,000–₹96,000/10 grams, citing geopolitical risks and Fed policy uncertainty.
• Indonesia: 24-karat gold bars (Antam) climbed to 1,931,000 IDR per gram, a +26,000 IDR increase from the prior day. The rebound reflected global safe-haven demand and local currency fluctuations.

Analyst Outlook and Risks

• Technical Analysis: Spot gold faces resistance at $3,398 per ounce and support near $3,310, with traders eyeing the Fed’s decision for direction.
• Valuation Risks: Key ratios like the Gold/Silver ratio (100:1 vs. historical average of ~70:1) and Gold/Platinum ratio (3.5:1 vs. 1–2 historically) signal potential overvaluation. Analysts warned of corrections toward $3,050/ounce if profit-taking accelerates.
• Macroeconomic Factors: Rising U.S. Treasury yields (10-year note at 4.23%) and a potential dollar rebound pose headwinds, though geopolitical risks and inflation concerns could offset these pressures.

Investment Strategies

• Buy Signal: Traders were advised to purchase MCX gold futures at dips below ₹93,500/10 grams, targeting ₹96,500/10 grams with a stop-loss below ₹92,300.
• Hedging: Maintaining gold exposure remains prudent as a diversification tool amid macroeconomic uncertainty. Digital alternatives like Pax Gold (PAXG), which ties tokens to physical reserves, offer liquidity for crypto-inclined investors.

Conclusion

Gold’s two-week high on May 6 underscores its enduring role as a safe haven amid escalating global risks. While the Fed’s policy decision and U.S.-China trade negotiations will dominate near-term volatility, long-term fundamentals remain bullish. With overvaluation signals and geopolitical tensions balancing each other, investors should monitor the June FOMC meeting and Gold/Silver ratio closely.

shows the ratio breaching 100:1—a historic overvaluation—suggesting short-term corrections. However, persistent trade disputes and a $36 trillion U.S. federal debt could sustain long-term demand. For now, gold appears poised to trade between $3,205–$3,390 per ounce, with upside potential if the Fed signals rate cuts.

In this uncertain landscape, gold remains a critical hedge, but traders must balance optimism with caution as markets digest macroeconomic crosscurrents.