US Dollar (USD) just made a new year-to-date low (YTD). This decline is largely the result of increasing concerns over the start of a trade war with the introduction of reciprocal tariffs by President Donald Trump. If that happens, the dollar’s value will depreciate considerably. This decline is coming against a backdrop of declining US bond yields and increasing expectations for Federal Reserve rate cuts. The gold and silver markets have responded positively as a result. This is reflected in the rising gold prices which have hit an all-time high due to increased demand for safe-haven assets.
In March, the USD had difficulty gaining traction as fears of an impending US economic slowdown grew. These worries were compounded by the confusion over tariffs. Investors are watching the effects of Trump’s recently imposed tariffs. This recent move has fueled fears of European Union retaliatory tariffs. The potential for a trade war has proven enough to rattle markets, with the prospect of escalating tariffs sending the dollar plummeting even further.
So as the dollar fell, the EUR/USD currency pair continued its recovery above the 1.0900 level. This movement underscores how Trump’s tariffs and their associated uncertainty have created a systemic weakness in the USD to the benefit of alternative currencies. USD purchasing power has fallen through the floor. This drop comes right in the wake of Trump’s release of his “Liberation Day,” the day he declared most of his trade policies.
Amid these developments, US bond yields experienced a slump, leading many investors to increase their expectations for future rate cuts by the Federal Reserve. Now with rates seemingly on a downward trajectory, the appeal of gold as a safe, non-yielding asset has made it even more attractive. As the result of fear and speculation, the precious metal has skyrocketed in price, hitting successive all-time highs. Investors are rushing to it during all this volatility in the stock market.
Even in light of all these bullish gold trends, some investors have decided to sit on the sidelines and stop actively trading. Market analysts have noted that bullish investors are waiting to make new bets. This caution comes on the heels of a notable bearish divergence found on the relative strength index (RSI). This hesitance is a sign that despite gold prices continuing to skyrocket, many investors are still wary of expecting a correction.
Drilling deeper into the forex market uncovers an even more alarming piece of data. Approximately 81.4% of retail investor accounts lose money when trading contracts for difference (CFDs) with this provider. While unfortunate, this statistic is a good reminder of the inherent market risk involved in trading speculative markets.
Our analysts are watching for developments as the situation unfolds. They caution that fears of a tariff-induced US economic slowdown will continue to weigh on the USD. This mix of political choices and market response creates an unpredictable backdrop for future economic trends.