Gold Faces Third Day of Selling Pressure as Markets React to Trade Tensions

Gold futures experienced their third consecutive day of selling pressure, with the most active June contract declining by $57.30 (-1.87%) to close just below the key $3,000 level at $2,998.80 per troy ounce. This downward pressure stemmed from Trump's Tuesday announcement, coupled with dollar strength and rising U.S. Treasury yields. The U.S. Dollar Index gained 0.52% to close at 103.22, marking its second consecutive day of appreciation.

Silver demonstrated greater sensitivity to the equity market recovery than gold. May silver futures opened at Friday's closing price of $29.23 and, despite dropping to an intraday low of $27.545, rallied to close at $29.605, gaining 1.28% ($0.375).

Global equity markets showed significant weakness, particularly in Asia where the Hang Seng Index plummeted 13%. While European markets also fell sharply, U.S. equities demonstrated resilience and potential recovery signs. Following Friday's substantial losses (Dow Jones -3.21%, NASDAQ -2.53%, S&P 500 -4.84%), Monday's trading session showed improvement. The S&P 500 recovered from early losses to finish only slightly lower (-0.23%), while the NASDAQ composite actually closed in positive territory (+0.10%).

Jim Cramer issued a stark warning on his Saturday show regarding current market volatility, stating that if the president doesn't try to reach out and reward countries and companies that play by the rules, then the "1987 scenario 'Black Monday', where we went down three days and then down 22 percent on Monday, has the most cogency." This statement came as U.S. stock futures dropped sharply Sunday evening following the announcement of significant reciprocal tariffs, raising concerns about a potential market event reminiscent of "Black Monday."

Former Federal Reserve Bank of St. Louis President James Bullard warned that the escalating trade tensions could lead to consequences similar to those following the Smoot-Hawley Act of 1930, which contributed significantly to the Great Depression by effectively collapsing global trade.

"The main thing is that this has dramatically raised the risk of a Smoot-Hawley type outcome," Bullard, dean of Purdue University's Daniels School of Business, said on CNBC's "Squawk Box," referring to the Smoot-Hawley Tariff Act of 1930.

This protective measure ultimately backfired as other nations implemented retaliatory tariffs on American exports, further damaging international trade relations and deepening the economic crisis.

As markets continue to digest the implications of rising trade tensions, gold's retreat below the psychological $3,000 mark signals investors' recalibration of risk assessments. The divergent performance between gold and the equity markets highlights the complex interplay of forces currently shaping global finance. With historical parallels being drawn to both the 1987 market crash and the devastating economic consequences of the Smoot-Hawley tariffs, investors remain on edge. 

Wishing you, as always good trading,