Gold Could Surge- Here's Why

Gold is the most traded asset amongst retail traders largely because of its volatility and accessibility. 

Those that have been long since 2023 would be very happy. 

Gold’s bullish performance continues to shine (pardon the pun), and I see reasons why it could continue for the foreseeable future. 

Here are some of those:

1. Uncertainty remains

As I was planning this post, and researching my idea, Trump relit his tariff fire with an announcement of at least a 50% tariff on the European Union scheduled for June 1st, which sparked a sharp rise in the volatility index from 20.00 to 25.15. This also saw US stocks being sold off as Trump tariff war 2.0 starts again. 

The Euro Stoxx 50 was the most impacted, now down 2.9% on the day. 

This announcement came an hour after reports of Germany holding talks with China over a strategic deal and cooperation in AI and quantum technology. 

Fascinating. 

But this announcement plays into the theory of stronger gold prices remaining for the foreseeable future. The price of gold is up 1.8% on the day. Investors at this time see this as selling USD, again adding fuel to the already burning hot gold market. 

2. US Bonds being sold off

I have touched upon this in multiple posts, but the narrative at the moment is that no one wants to own US debt. A report on the 21st May highlighted the poor turnout at the US bond market auction, which was a bit of a dud, as shown in the TLT ETF.

The way bonds work: The government wants to borrow money so they issue bonds and the coupon rate is the yield. That’s why they have an inverse relationship. When bonds fall like they are now, it’s because the demand isn’t there. The investor doesn’t think the current yield is worth the risk, especially the medium to long term yields like the 10 and 30 year. 

So, where are investors going instead? Well they are getting better returns elsewhere, like Gold and US stocks. 

3. Technical factors

The price of gold rebounded from the lows of $3,150.00 and is now trading about the key support of $3,250.00. This level is where an inverse head and shoulders pattern formed on the H4 time frame. The level is also the neckline of that pattern which could offer a long opportunity if re-tested. 

If the price of gold does head higher then the obvious target is the all time highs around $3,500. But beyond that then the number is unknown.

If the narrative discussed in the blog continues to drive the market over the remainder of this year then there is a strong possibility that the price of gold could reach as high as $5000.00. 

Final Thoughts

What will be key to this, Donald Trump and the next trade tariff situation which will now hit the European Union. How the EU act is also going to be one to watch. Do they go strong with possible deals with China on the cards, or do they give the US what they want? Signs so far are that they are willing to go toe to toe with the US right now. 

It seems only one asset will benefit in this situation. That could be gold.