The global financial markets are currently navigating a storm of economic uncertainties, with a number of key developments influencing investor sentiment. In recent days, several factors have converged to create volatility, including rate cut bets by the Reserve Bank of Australia (RBA), China's economic struggles, and a modest strengthening of the US Dollar. These elements have collectively put pressure on the Australian Dollar, pulling it away from its one-month peak. Meanwhile, the tech sector has been rattled by the move of several Chinese companies to open source their artificial intelligence (AI) model offerings. This decision has sent shockwaves throughout the industry.
In addition, the USD/JPY currency pair has shown resilience, bouncing back from a six-week low to regain 155.50 during Asian trading on Tuesday. Meanwhile, US Treasury Secretary Scott Bessent has proposed new universal tariffs on US imports, starting at 2.5% and rising gradually. However, President Donald Trump has made clear his desire for tariffs that are "much bigger" than this initial figure. Moreover, Trump's administration is targeting imports across a range of industries, including computer chips, pharmaceuticals, steel, aluminum, and copper.
China's release of its low-cost AI model, DeepSeek, has precipitated a global AI sell-off, which has notably impacted Nvidia, causing its shares to plummet by approximately 18%. The repercussions of this move have been felt across Asian markets, which continue to reel from the effects of the AI sell-off. Amidst these economic challenges, gold prices remain poised for an upside, buoyed by a bullish daily Relative Strength Index (RSI) while staying above the 21-day Simple Moving Average (SMA).
The gold market is closely watching technical indicators, with the 50-day SMA closing above the 100-day SMA, confirming a Bull Cross. However, gold's inability to close above the symmetrical triangle target of $2,785 has warranted caution for buyers. For gold to reach new heights, it must achieve a daily closing above the record high of $2,790 to exceed $2,800.
The upswing in US Treasury bond yields has also contributed to the bearish undertone in gold prices. This increase in yields is linked to reports that the White House may pause all federal grants, adding further complexity to market dynamics. Investors are now turning their attention to the Federal Reserve's two-day monetary policy meeting, which begins later this Tuesday. The policy decision and Chairman Jerome Powell's press conference are scheduled for Wednesday.
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