Reversal of Tariff Ban Sparks Dollar Rally, Weighing on Gold.
Gold prices fell sharply on Friday, retreating to around $3,290 per ounce, as the US Dollar staged a significant rebound following a legal twist in America’s trade policy drama. The catalyst for the selloff was a US Appeals Court decision that suspended a prior ruling invalidating former President Donald Trump’s tariffs—measures that had earlier been declare illegal by a lower court.
The unexpected court decision sparked renewed uncertainty in global trade relations and revived expectations of tariff-induced inflation, thereby strengthening the Greenback. A stronger US Dollar generally dampens gold’s appeal, as it makes the metal more expensive for international buyers, leading to reduced demand.
Tariff Drama Reignites: From Invalid to Temporarily Reinstated
Earlier this week, the US International Trade Court struck down the Trump-era tariffs, calling them an abuse of the International Emergency Economic Powers Act (IEEPA). The court concluded that trade imbalances do not constitute a “national emergency”, casting doubt on the legal rationale behind sweeping import duties.
Trump’s tariffs included reciprocal duties on China, fentanyl-related tariffs on North American partners, and levies tied to perceived border negligence. Their rollback had initially lifted gold prices on hopes of eased trade tensions. But that optimism short-lived, as the Appeals Court’s intervention effectively paused the rollback, reviving the uncertainty and shifting the market narrative once again.
Dollar Index Bounces Near 99.65, Reversing Gold Momentum
In response to the legal update, the US Dollar Index (DXY) climbed back toward 99.65, regaining strength against a basket of six major currencies. This upward movement reflects a resurgence of safe-haven demand for the USD amid policy unpredictability and global market unease.
The stronger dollar served as a key headwind for gold, driving down its price from Thursday’s highs. Just a day earlier, gold had rallied on optimism over the invalidation of the tariffs and expectations of slower US inflation, but the market quickly recalibrated.
Upcoming Core PCE Inflation Report Adds Caution
In addition to the tariff saga, traders are also positioning cautiously ahead of the release of the US Personal Consumption Expenditures (PCE) Price Index—the Federal Reserve’s preferred inflation gauge. Scheduled for release at 14:30 GMT, the April report is expected to show year-over-year core inflation at 2.5%, slightly below the prior reading of 2.6%. On a monthly basis, core PCE is projected to rise by just 0.1%, after remaining flat in March.
While a weaker inflation print typically supports gold by reinforcing the case for Fed rate cuts, this data release is unlikely to drive major shifts in expectations. Fed officials have emphasized that consumer inflation expectations—and now, tariff-related uncertainties—are playing a greater role in shaping their policy outlook.
Fed’s Goolsbee Warns of Policy Paralysis Amid Tariff Uncertainty
Echoing this sentiment, Chicago Fed President Austan Goolsbee made pointed remarks on Thursday about the negative impact of tariff unpredictability on business decisions. “If people can’t count on consistent policy, then they’re just going to slow down and not act,” he warned, referring to the chilling effect on investment and hiring.
Goolsbee noted that the recent court developments could add to the confusion, especially if the administration moves to reinstate tariffs through alternative legal routes. He also hinted that if tariffs were avoided—either through deals or definitive court rulings—interest rate cuts could follow as a stimulative response.
White House Signals Commitment to Tariff Strategy, Regardless of Legal Setbacks
Meanwhile, the White House continues to double down on its protectionist stance. In remarks reported by Reuters, Peter Navarro, a prominent trade negotiator, declared: “Even if we lose [in court], we will do it [tariffs] another way.” This statement reinforces the view that tariffs remain a key pillar of US trade policy, irrespective of legal hurdles.
The administration’s unwavering posture is likely to keep trade-related uncertainty elevated, thereby supporting the US Dollar and weighing on commodity prices, including gold. This could also complicate the Federal Reserve’s path forward, as the interplay between trade policy and inflation expectations becomes more tangled.
Market Reaction: Gold Traders Turn Defensive Amid Mixed Signals
The market’s reaction to these developments has been swift. Gold, which had enjoyed a steady uptrend through much of May, saw profit-taking accelerate as the Appeals Court ruling revived the prospect of a renewed tariff war.
Moreover, the anticipation of the PCE data has led many traders to adopt a wait-and-see approach, further reducing short-term bullish bets on the metal. Even though inflation appears to be moderating, the real interest rate outlook remains uncertain, especially with geopolitical risks and trade tensions back in focus.
Outlook: Gold Faces Crosscurrents from Policy, Dollar, and Data
Looking ahead, gold trajectory will be shape by three main factors:
- Legal and political developments surrounding US tariffs—especially if Trump’s policies further reinstated or reconfigured.
- The strength of the US Dollar, which could continue to rise if trade tensions escalate and investors flock to safety.
- Upcoming inflation and employment data, which will help clarify the Fed’s monetary policy path.
If inflation continues to slow and the Fed signals an openness to rate cuts in response to trade-related uncertainty, gold could recover its recent losses. Conversely, if the Dollar strengthens further or tariffs are reinstated more aggressively, the metal could see deeper corrections.
Gold Technical Analysis: Critical Support Near $3,275
On the technical front, gold is currently hovering near the $3,290 mark, with immediate support seen around $3,275, a level that has historically acted as a demand zone. A decisive break below $3,275 could open the door toward the next support level near $3,240.
On the upside, resistance aligned at $3,330 and $3,360. Momentum indicators like the Relative Strength Index (RSI) have turned mildly bearish, reflecting the shift in short-term sentiment.
Traders should watch for a clear directional cue from the PCE data and court-related developments in the coming sessions.
