U.S. Tariffs on Mexico and China Could Drive Gold Prices Higher

Why I'm watching the 2900 support level, and why you should be, too

President Donald Trump’s tariffs on goods from China and Mexico, two of America’s largest trading partners, are supposed to address trade imbalances and national security concerns. But they’ll also have far-reaching unintended consequences for global markets. Here’s why:

• China's Vulnerability: Any disruption of trade with China, a major global exporter, could lead to an economic slowdown in the U.S, heightening demand for safe-haven assets like gold.
• Mexico’s Role: While not as large as China, Mexico is a key trading partner with the U.S. That means tariffs on Mexican goods could spark inflation and raise supply chain issues—both of which could push investors toward gold.

As tariffs escalate, the market will likely experience heightened volatility, making gold an attractive hedge against the uncertainty.

Gold and uncertainty

Gold has long been seen as a reliable store of value during times of geopolitical and economic turmoil. With tension heating up, here’s how gold could respond:

• Inflation Hedge: Tariffs can raise the price of imported goods, potentially leading to inflation. Gold performs well during times of inflation because it tends to retain its value when currencies lose purchasing power.
• Market Volatility: As stock markets react to the uncertainty of tariffs, investors flock to gold, knowing it often holds steady during periods of volatility.

With rising tension, investors could turn to gold as a safety net. The increased demand would exert upward price pressure.

2900: A trading opportunity

For traders, the support level at 2900 is crucial. This level has proven to be a key price point where market participants have been very active in the past, defending gold from falling further. If gold prices approach this support again, it could signal a good opportunity for long trades. Here’s what to watch for:

• Price Action Confirmation: Look for signals—such as a strong reversal candle, increased volume or buying pressure—to confirm 2900 is holding as support.
• Potential for Rebound: If gold stabilizes around that level, the price may rise as traders look to capitalize on its safe-haven appeal during uncertain times.

I’ll be closely watching gold around the 2900 mark for potential buying opportunities. If we see the market respond positively at this support level, I’ll consider entering long positions.

Tariffs: Higher prices and inflation

U.S. tariffs on both China and Mexico could have broader implications on consumer prices and inflation, according to recent reports. One pundit put it this way:

"Every day, many people in the U.S. eat fruit grown in Mexico, use phones made in China and live in homes built from lumber from Canada. Now, trade with those three countries could be interrupted."

Here’s what another writer had to say: "An analysis by the nonpartisan Tax Foundation found that if the tariffs Trump threatened in recent days are imposed, it would amount to an average tax increase of more than $800 per U.S. household in 2025." This increase in costs can lead to higher inflation, which could boost demand for gold as investors look to protect their wealth.

The tariffs on China could affect merchandise ranging from footwear to electronics, including iPhones, iPads, tablets and laptops. Major brands like Apple (AAPL) are now facing tariffs on their products. This could cause more financial strain on consumers and create further volatility in the broader economy.

Navigating volatility

With U.S. tariffs on China and Mexico likely to cause economic uncertainty, gold is positioned as a strong contender for investors looking for stability. As traders, it’s crucial to monitor technical levels like 2900 for potential long opportunities.

During times of geopolitical turmoil, strategic positioning at key price points and understanding market sentiment can provide significant upside potential. The ongoing trade tensions are likely to keep the market volatile, so staying nimble and being prepared for opportunities is key.

Monitor the charts and be ready for the next move!

Errol Coleman appears on the tastylive network shows Today’s Assignment and Trades on the Go.