Gold rebounds above $1300 on US tariffs, upside limited by USD recovery

• Gold rebounds after US announces tariffs on EU, Mexico and Canada.
• Wall Street drops sharply, US dollar rises on risk aversion.

Gold prices dropped after the release of US data but rebounded after US Commerce Secretary Wilbur Ross announced that the European Union, Canada, and Mexico will face steel and aluminum tariffs beginning at midnight tonight.

The value of the ounce bottomed at $1,298/oz after better-than-expected US data. Following the imposition of tariffs jumped to test daily highs at $1,306. It failed to break above and pulled back to the $1,300 zone.

The bullish momentum lost strength during the last hours amid a recovery of the US Dollar across the board. The greenback benefit from risk aversion. The DOW JONES lost more than 200 points during the last hours amid fears of a “global trade war”. Mexico announced retaliatory measures and European leaders regretted Trump’s decision.

XAU/USD still in range

The yellow metal continues to move sideways around $1,300 unable to set a clear direction. On the upside, a consolidation above $1,307 is needed in order to clear the way to more gains. The next resistance levels might be seen at $1,315 and $1,318.

On the flip side, the area at $1,295 and a short-term uptrend line  is offering support: a close under that level could open the doors to more losses with potential target at $1,288 and the 2018 low at $1,282.