Gold Set to Soar: How Calculations and Trump’s Tariffs Will Drive Price to New Heights Today
The Market Story Unfolds: Phi Number, Copper’s Invalidation, and USDX’s Turning Point
Gold is moving towards its key Fibonacci-extension-based (also known as Phi-based) target, followed by a reversal. This significant development has been discussed in detail previously, but the calculation process behind this technique remains unclear to some readers. To clarify this concept, let’s break down the steps involved.
Calculating the Phi-Based Target Price
One of the common questions received regarding this technical analysis is how the gold price target of $3,140 was obtained using the extension from 2015 to 2020 based on the Fibonacci multiplier of 1.618. The confusion arises because calculating $1,000 × 1.618 equals 1,618, not 3,140, as some might expect.
To understand this process better, note that the basis for multiplication is not solely the absolute value ($1,000) but rather the size of the previous rally – marked on the chart with a blue shade. The rally began at $1,045.40 (the 2015 low) and concluded in mid-2020 at $2,078. Given that this chart utilizes a logarithmic scale, it’s essential to focus on the relative price change, not the absolute or nominal values.
Here’s how it works with a logarithmic scale:
- The starting point is the 2015 low of $1,045.40.
- The reference high point is the mid-2020 high of $2,078.
- To calculate the ratio between them: $2,078 / $1,045.40 = 1.988
- Now, raise this ratio to the power of 1.618: 1.988^1.618 ≈ 3.03
By multiplying the starting price ($1,045.40) by 3.03, we arrive at our target price:
$1,045.40 x 3.03 ≈ $3,167.56, which approximates to the $3,167 target shown on the chart.
Having clarified this technical analysis process, let’s move forward to discuss what today’s market is presenting in terms of data and uncertainty.
The Markets Provide Uncertainty
Today has been characterized by heightened uncertainty due to several factors. For one, the ADP Nonfarm Employment numbers were significantly better than expected; however, it appears that no one is particularly paying attention to this, as everyone seems to be waiting for Trump’s comments on tariffs. Since these comments are scheduled at market close time, today’s trading session can generally be described as "peak uncertainty".
This state of heightened uncertainty has also led many investors towards gold as a safe haven. The performance of miners and silver on an immediate-term basis shows that this is the case, especially when viewed alongside long-term Fibonacci-extension-based targets for these assets.
Silver Rallies, Miners Decline
At present, silver is outperforming gold, while miners are declining in price – a classic sell signal on a short-term basis. Copper is observing a small dip at the moment, further supporting this picture as its performance diverges from expectations given current market data and the implications of Trump’s comments.
Trump’s Comments and the Expected Reaction
One thing that might happen following the announcement of tariffs will be the reduction in uncertainty (which could potentially halt gold’s decline). The other is the reversal based on buy-the-rumor-sell-the-fact. This rule implies that opposite price movements might occur to what seem likely given the announcement due to how market sentiment influences trading.
Markets typically see significant movement influenced by rumors before reversing their actions when actual news becomes available. A perfect illustration of this phenomenon can be seen in gold and copper. These assets rallied based on a rumor about increased tariffs (described by Trump as "Liberation Day"), which were expected to occur today. This implies the possibility that market sentiment will shift in response to actual implementation – opposite to what was initially anticipated.
USDX Rally Likely
As for stocks, even though declines based on tariff announcements and threats are understandable (this would be bearish for stock markets worldwide and particularly harmful to US trade), it’s worth noting that tariffs generally have positive effects on the US dollar. The USD Index is technically poised for a rally – its monthly turning point aligns perfectly with how the buy-the-rumor-sell-the-fact rule likely applies in this scenario.
It’s essential, however, not to confuse fact and emotion here: I expect sentiment shifts related to tariffs and their impacts on markets rather than a physical or fundamental change caused by any one market event.
