On Monday, the Dow dropped over 1,000 points after President Trump’s new round of criticism directed at Fed Chair Jerome Powell. The selloff reflects continued volatility driven by geopolitical tensions and uncertainty stemming from the ongoing trade war.
Meanwhile, the price of gold continued climbing to record highs, the U.S. dollar slipped to a three-year low, Bitcoin is working to recover the final 20% from its peak, and the broader market continued its downward slide.
This comparative snapshot on PerfCharts illustrates the bigger picture.
FIGURE 1. PERFCHARTS OF GOLD, DOLLAR INDEX, BITCOIN, AND THE S&P 500. Safe haven is the name of the game.
When capital rotated out of stocks and Bitcoin, did it retreat to cash or gold? It’s a reasonable question, as cash appears to be circling the drain amid gold’s ascent.
Fear Trade Tailwinds
So, what’s going on, particularly with gold prices? Here’s a general snapshot:
- The U.S. dollar index drop signals a loss of global confidence in the currency.
- The possibility of Trump removing Powell raises fears about the Federal Reserve’s independence, especially as inflation concerns mount due to rising tariffs.
- Fed Chair Powell indicated that rate hikes, not cuts, may be needed to control inflation.
- Global trade tensions are intensifying, with China slashing U.S. oil imports and pivoting to other countries.
- As the price of gold has broken through major resistance levels, SPDR Gold Shares (GLD) just crossed $100 billion in assets under management for the first time.
One More Thing: The Mar-a-Lago Accord
The so-called “Mar-a-Lago Accord” is an idea tied to Trump’s economic team that would pressure U.S. allies to accept a weaker dollar and lower returns on U.S. debt in exchange for military protection.
If it happens, the dollar would devalue further, making U.S. exports more competitive. Imports would become more expensive, though. A weaker dollar may continue to boost gold and Bitcoin, both viewed as safe havens. As for the S&P 500, some companies, especially exporters, might benefit, but concerns about inflation or trade conflicts could drag the market down even further.
Gold at $4,000 by 2026
While several analysts, such as those at UBS, have set a $3,500 price target for gold, the Goldman Sachs Group forecasts gold at $4,000 by 2026.
Let’s take a look at where gold is now. Take a look at this daily chart.
FIGURE 2. DAILY CHART OF GOLD. With gold at all-time highs, the pullback could bounce at one of these support levels.
While gold’s Relative Strength Index (RSI) reading is registering as “overbought,” you’ll have to wait and see if the current dip develops into a pullback. If it does, the key market highs and lows highlighted by the Price Channels (extended by the magenta dotted lines) are likely to serve as support. I also overlaid the Ichimoku Cloud to provide a wider projected support range into the near future.
If you’re bullish on gold and expecting to reach the $3,500 to $4,000 range as forecasted by analysts, you can use these support levels as favorable entry points. The $2,956 level is especially important; it marks a key swing low, and a close below it could call gold’s uptrend into question.
As for “Digital Gold” (Bitcoin)…
The other safe haven asset, as some would call it (emphasis on “some”), is Bitcoin ($BTCUSD). Let’s take a look at its current price action by zooming in on this daily chart.
FIGURE 3. DAILY CHART OF BITCOIN ($BTCUSD). It’s at a juncture point, currently testing resistance at $88,505.
Looking at the price channels, you can see how Bitcoin has been making consecutive lower lows over the last three months. It has also been making lower highs until March, where the high of $88,505 was tested three times, and that is where the digital asset is currently trading.
The Ichimoku Cloud range and the blue-shaded area highlight this resistance level. If the market decides on Bitcoin as a reliable safe haven, you will see its price break above this resistance level and challenge the next resistance level at $100K before challenging its all-time high at around $109K. Currently, its RSI reading is lifting above 50 and rising, indicating that the crypto has room to run before approaching any range that may be considered overbought.
What About the Dollar?
The weekly chart of the US Dollar Index ($USD) below highlights the key support level the dollar has just broken below.
FIGURE 4. WEEKLY CHART OF THE U.S. DOLLAR. Near-term support is near, but will it hold?
The US Dollar Index is at a three-year low, with support at $97 and $95. The RSI also indicates that the dollar is entering oversold levels. But these technical levels might not mean much considering the alleged intentional devaluation of the dollar. This trend appears to be guided more by political strategy than market fundamentals.
Meanwhile, the fear trade into safe-haven assets is likely to intensify until monetary policy and the current geopolitical chess moves generate a clearer sense of direction and stability.
At the Close
As far as gold’s rise, sentiment is doing the heavy lifting right now, but it’s rooted in legitimate fundamental risks. If those risks persist or worsen, fundamentals may eventually validate even higher price levels. Hence, the Goldman projection of $4,000 an ounce. If you’re looking to enter gold or Bitcoin, I’ve laid out the key support levels for gold and potential headwinds for Bitcoin.
Watch those price levels closely, and stay tuned to the latest geopolitical developments.
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.