Wall Street turns bearish after equity collapse pulls gold lower, Main Street maintains moderate bullish bias

NEW YORK (April 5) Precious metals and broader markets rode a roller coaster this week, ratcheting higher on optimism that President Trump's tariffs would be low and targeted, before collapsing after Wednesday afternoon's announcement drove home the reality that a global trade war had begun. 

Spot gold kicked off the week trading just under $3,100 per ounce, and after a quick slide down to test support in the $3,077 area, it spent the balance of the Asian trading session rocketing higher before topping out at $3,128 per ounce. 

European traders maintained the yellow metal in a range between $3,112 and $3,127, and after a quick dip back down to $3,100 at the North American open, gold returned to this range for the duration of Monday's trading. 

Again, bullish sentiment was driven by Asia, as spot gold rose sharply in the evening, topping out at $3,149 per ounce shortly before 2:00 a.m. EDT. Gold then retested the previous session high of $3,126 as support, a level which held until a sharp noon EDT sell-off drove prices back down to $3,100. 

From there, markets were content to trade the yellow metal between $3,100 and $3,135 as the world held its breath in anticipation of U.S. President Donald Trump's announcement of the size and scope of reciprocal tariffs on Wednesday afternoon. 

Once Trump broke out the big board and investors got a chance to see the size of the trade tariffs being proposed, equity futures went into free-fall, while spot gold shot up to a new all-time high of $3,168 per ounce by 7:55 p.m. Eastern. Shortly afterward, the release of details showing that gold and silver would not be tariffed eased some of the bid beneath gold prices, and by the early morning, spot gold had returned to the $3,120 per ounce level it was trading at just before the announcement. 

But Western equity markets had yet to express their horror, and when European traders began to dump their stock positions, gold prices collapsed in sympathy, falling to the then-weekly low of $3,054 per ounce 15 minutes before the North American market open. 

This time, it was the Americans who boosted gold prices, as the initial equity sell-off drove spot gold back up to $3,135 per ounce. Multiple retests of the $3,100 level held for the duration of the North American session, and for much of Asian trading, but another European equity collapse early Friday morning pushed gold down to $3,080 per ounce.

After rocketing back up to test resistance at $3,135 at 7:15 a.m. Eastern, gold's ultimate capitulation began as the yellow metal fell all the way to the weekly low of $3015.65 at 11:45 am, just as Federal Reserve chair Jerome Powell was dashing hopes that the central bank would come to the market's rescue. 

After one final retest of $3,015 held shortly after 1:30 p.m. Eastern, spot gold settled into a $20 range for the duration of Friday's trading. 

The latest Kitco News Weekly Gold Survey showed industry experts abandoning last week’s extreme bullish bias, while retail traders grew only slightly more pessimistic about gold prices for the week ahead despite this week’s dramatic sell-off.

“Higher,” said Rich Checkan, president and COO of Asset Strategies International. “The sell-off yesterday and today was all about raising cash to meet margin calls after the equities markets tanked as a result of reciprocal tariffs. Bargain hunting buyers will swoop in next week to buy cheap gold and silver… raising prices from this temporary drop.”

“I am bearish on gold for the coming week,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “Gold has had a big run ahead of this week’s tariff announcements and I think we may see a correction in the very short term as some traders take profits against the news.”

“For the medium term, the underlying uncertainties that have propelled the larger uptrend in gold remain intact,” he added.

Adrian Day, president of Adrian Day Asset Management, sees more downward momentum for gold prices in the near term, but hasn’t changed his longer-term bullish bias.

“A continuation of the pullback, perhaps down to $3,000, is likely over the next several days, but any pullback will be brief and shallow,” he said. “The drivers of gold over the past two years have not gone away, but become even more pressing.  Notwithstanding the huge move this year, gold remains under-owned, particularly in North America.  So DOWN for the next week, but wildly bullish for rest of year!”

“Up,” said Darin Newsom, senior market analyst at Barchart.com. “We can throw out technical and fundamental analysis at this point and focus only on fear. When the world starts to crumble, long-term investors will either get out and move to a safer investment or cover existing investments with a safe-haven market hedge. I could see this both supporting and pressuring gold, depending on if these hedges are long or short positions. But the bottom line is buyers should continue to outweigh sellers given the uncertainty of the geopolitical situation.”

“Up,” said James Stanley, senior market strategist at Forex.com. “Bulls have shown considerable resilience since the breakout over $2950 in March, and I think there’s still a case to be made for demand, especially if gold pulls back for support tests at 3k or perhaps even that $2950/oz zone.”

Kevin Grady, president of Phoenix Futures and Options, said the strength of the market-wide selloff is something to behold.

“It's pretty wild, even with gold,” he said. “I think there's a few things. I think people are selling profitable positions to raise margins for equities. And as the market's driving down like this, I think when gold started spiking up like that, you saw a lot of speculators coming into the market. Those are what we call weak longs, and I think a lot of those people are liquidating.”

“The algos are in control right now,” Grady added. “And I think a lot of the big banks were out of this position, a lot of them were neutral going into [the April 2 tariff announcement]. We'll see how we go here.”

As for gold’s near-term price direction, Grady thinks there’s more downside in the broader market to work through before the yellow metal can disengage from equities and resume its uptrend.

“I do not think you're going to see a big rally in gold next week,” he said. “I think a lot of people are reassessing right now. Everyone is scrambling to get margin calls, and there's a lot of disruption in the market. Commodities were the big beneficiary, commodities were up this year as opposed to all the other asset classes. I think a lot of them are selling some of these profitable positions to raise margins for those equity positions they have.”

Another driver Grady sees is concern over the possibility of a global economic slowdown, which will depress demand for commodities. “Maybe I don't want to own copper,” he said. “The market's just going to wait and see what happens. I don't think you're going to see everything bounce back immediately. I think this is going to take some time to work through.”

Asked where people are investing their money if risk assets are collapsing and gold is being liquidated to cover them, Grady said they’re not.

“A lot of cash,” he said. “I think there's a flight to safety, just risk-off, and I think a lot are in cash. They don't know where it's going. It's hard to be invested.”

“I ultimately think these valuations on stocks are getting very attractive,” he added. “I don't think they're at a bottom right now, but I do think that you're going to see some pretty interesting valuations.”

Grady said that one of the important factors in the medium term will be watching how gold and precious metals come out of this pullback now that investors know there are no tariffs hanging over them.

“One of our big products that we broker is the EFP [exchange for physical], the spot versus futures, and that's just been insane,” he said. “I want to see if that normalizes. This is going to take some time. This is not going to be four days, five days. This is going to take some time for everybody to digest where it's going to go.”

This week, 16 analysts participated in the Kitco News Gold Survey, with Wall Street reversing course after last week’s overwhelmingly bullish bias. Five experts, or 31%, expected to see gold prices rise once again during the week ahead, while eight analysts, or 50%, predicted further price declines for the precious metal. The remaining three experts, representing 19% of the total, saw consolidation at these lower levels for gold.

Meanwhile, 273 votes were cast in Kitco’s online poll, with Main Street sentiment declining only slightly from the prior week. 167 retail traders, or 61%, looked for gold prices to rise higher next week, while another 70, or 26%, expected the yellow metal to trade lower. The remaining 36 investors, representing 13% of the total, saw gold prices trending sideways during the week ahead.

Inflation data and the Fed return to the fore next week, with the publication of the FOMC minutes from the March monetary policy meeting on Wednesday, followed by U.S. CPI for March on Thursday, and U.S. PPI on Friday.

Friday morning will also see the release of the latest University of Michigan preliminary consumer sentiment survey, which will be an important measure of how the average American feels about the direction of the economy.

Marc Chandler, managing director at Bannockburn Global Forex, thinks gold’s sell-off is likely to continue in the near term.

“Despite ideas that it is central bank gold buying that drove the yellow metal to record highs, private investors seemed to see it more like a risk asset in the last couple of sessions,” he said. “Despite the sell-off in the dollar and sharply lower rates, gold succumbed to selling pressure alongside equities. That said, the roughly 1.5% pullback simply gave back this week’s gains.  It settled near $3085 last week and is near there now.”

“A break of $3054, roughly Thursday’s low, could signal a test on the $3030 area and then around $3000,” Chandler added. “The momentum indicators appear poised to turn lower. The pullback may test the resolve of investors.”

Everett Millman, chief market analyst at Gainesville Coins, was watching gold and silver prices slide alongside the broader market on Friday.

“I think the biggest factor that's causing this major pullback is simply people liquidating their precious metals positions in order to claw back some of these really steep losses that we've seen in broader markets,” he said. “You could probably also make a pretty good case that, although we know they have these monetary properties, gold and silver still tend to fit in with the trends in commodity markets in general. We've seen the prices of a lot of other commodities melting down right now, and that possibly has got some gravitational pull that's dragging gold and silver lower.”

Millman said that it’s very common at the beginning of a major market sell-off that safe havens like gold also tend to sell off in the initial stages. “That's just a really convenient way for investors to make up for some of the losses elsewhere in their portfolio. I think that's the main thing going on.”

Millman doesn’t necessarily see an obvious price floor for gold in this environment until the bleeding stops in equity markets.

“Probably stabilization first,” he said. “And in the absence of that – let's say stocks don't really stabilize – we would likely need to see a policy response, some kind of mention that there's going to be a stimulus package or the Fed more openly talking about cutting rates soon. But as far as the actual price floor, because the gold price rose so rapidly in the first quarter of the year, it's difficult to say that there's a really clear line in the sand as far as support. $3000 looks to be holding, at least for today, but it doesn't strike me as anything other than a psychological level.

“I think it's very possible we get gold closer to $2,900 or even below that if this sell off continues,” Millman said. “Very important time right now for the gold market, to either confirm or reject there being a price floor.”

Analysts at CPM Group are recommending that gold investors keep their long positions but stick to the sidelines, and be ready to buy gold once the pullback is complete.

“Gold prices have traded in a $123 range so far this morning, as financial markets around the world reacted to the negative economic implications of President Trump’s tariffs presentation on 2 April,” they wrote. “Gold spiked to $3,196.60 in early trading, 0.1% shy of CPM’s 28 March Gold Target of $3,200. Gold then plunged to as low as $3,073.50 as stocks, bonds, currencies, and a full range of commodities sold off.”

“Gold will be excluded from Trump’s tariffs, should they be imposed and should the White House’s announced plans and exclusions stay as they were announced Wednesday 2 April,” they noted.

The analysts said that two factors pushed gold prices higher in recent weeks. “One was the risks, uncertainties, and anxieties created by the White House’s talks about various tariff plans and other policies that carry negative economic consequences for both the United States and the world,” they said. “The other was the move toward the active April Comex gold futures contract’s first delivery date this past Monday, 31 March.”

CPM said the Comex gold roll is largely behind the market now. “Only 1.6 million ounces of open interest remains in the April Comex gold contract, with 40.3 million ounces now in the next active June contract,” they noted. “A total of 4.8 million ounces of Comex depository receipts for physical gold have been delivered in the first three trading days of the delivery period – 7.8% of the 44.5 million ounces of eligible and registered gold in Comex registered depositories.”

“CPM would Stand Aside on gold for now,” they wrote. “It would not be a buyer or seller at current prices as this is being written. CPM would be a buyer on dips to $3,050 or lower, as it still expects the economic outcomes of the tariffs and other policies to be both inflationary and recessionary.”

“Down,” said Michael Moor, founder of Moor Analytics. “In a higher time frame, we are still in an overall bull trend from November 2015, and likely in the later stages. Part of this is a prediction I made of $151 minimum, $954 (+) maximum from $2,148.4 – of which we have attained $1,043.3 FULFILLING THE MAXIMUM!  This is ON HOLD.”

“On a lower time frame, the trade above 27041 (-.6 of a tic per/hour) has brought in $497.5 of strength,” Moor added. “The trade above 27247 (-.6 of a tic per/hour) projected this upward $55 minimum, $235 (+) maximum—we have attained $476.9. These are ON HOLD. The trade below 31506 (+5 tics per/hour) projects this downward $56 (+)—we have attained $115.9. The trade below 30834 (+2 tics per/hour) projects this downward $85 minimum, $125 (+) maximum – we have attained $48.7 so far, but if we break back above decently, look for decent short covering.”

And Kitco Senior Analyst Jim Wyckoff expects gold prices to maintain their current range next week. “Sideways and choppy as bulls are spooked and standing on the sideline at present,” he said. “However, sellers are also jittery.”

KitcoNews