- Gold price remains well supported by the uncertainty surrounding Trump’s aggressive trade policies.
- Fed rate cut bets further benefit the yellow metal, though a modest USD uptick caps further gains.
- An improvement in global risk sentiment would further warrant some caution for the XAU/USD bulls.
Gold price (XAU/USD) extends its consolidative price move near the all-time peak touched the Asian session on Friday. Positive comments out of the White House and from Canadian officials, along with reports that there will be enough Democratic votes to avoid a US government shutdown, boost investors’ confidence. This is evident from a generally positive tone around the equity markets, which, along with some follow-through US Dollar (USD) buying for the third straight day, acts as a headwind for the safe-haven precious metal.
However, the growing market acceptance that the Federal Reserve (Fed) will cut interest rates several times this year might hold back the USD bulls from placing aggressive bets. Adding to this, persistent worries about US President Donald Trump’s aggressive trade policies and their impact on the global economy should support the Gold price. This, in turn, suggests that any corrective pullback might still be seen as a buying opportunity and help limit losses for the XAU/USD pair, which remains on track to register gains for the second straight week.
Daily Digest Market Movers: Gold price bulls pause for breather amid positive risk tone and modest USD strength
- US President Donald Trump ups the ante on the tariff war, saying that he would levy a 200% duty on European wine and cognac imports unless the European Union removes surcharges on US whiskey. Trump had earlier threatened that he would respond to any countermeasures announced by the EU.
- This comes on top of Trump’s 25% tariff on all steel and aluminum imports, which took effect on Wednesday, fueling concerns about the risk of a further escalation in the tariff war between the US and its top trading partner, and pushing the safe-haven Gold price to a fresh record high on Friday.
- Traders ramp up their bets that the Federal Reserve will have to lower interest rates this year by more than expected amid the rising possibility of an economic downturn on the back of the Trump administration’s aggressive policies. The expectations were lifted by softer US inflation figures this week.
- In fact, data released on Wednesday showed that the headline US Consumer Price Index (CPI) rose less than expected, by 2.8% on a yearly basis in February, down from 3% in the previous month. Moreover, the core gauge eased to the 3.1% YoY rate from the 3.3% increase registered in January.
- Adding to this, the US Producer Price Index (PPI) was unchanged in February and the yearly rate slowed to 3.2% from 3.7% in January. This pointed to signs of easing inflationary pressure in the US, which, along with a cooling US labor market, supports prospects for further easing by the Fed.
- Traders are currently pricing in the possibility of three 25 basis points Fed rate cuts each at the June, July, and October monetary policy meetings. This, in turn, is seen as another factor that underpins the non-yielding yellow metal, though a combination of factors keeps a lid on further gains.
- The global risk sentiment gets a minor lift in reaction to some positive comments out of the White House and from Canadian officials. Ontario Premier Doug Ford said that the meeting with US Commerce Secretary Howard Lutnick has lowered the temperature on the ongoing trade war.
- Moreover, Russian President Vladimir Putin expressed conditional support for a 30-day ceasefire proposal put forward by the US and Ukraine. This, along with reports that there will be enough Democratic votes to avoid a US government shutdown, further boosts investors’ confidence.
- Meanwhile, the US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, prolongs its recovery from the lowest level since October 16 for the third successive day. This further contributes to capping the upside for the commodity during the Asian session.
- Traders now look forward to the Preliminary release of the Michigan US Consumer Sentiment and Inflation Expectations Index for short-term opportunities. The market focus will then shift to the crucial two-day FOMC monetary policy meeting starting next Tuesday.
Gold price seems poised to prolong its well-established uptrend while above the $2,928-2,930 resistance breakpoint
From a technical perspective, this week’s breakout through the $2,928-2,930 horizontal resistance and a subsequent move beyond the previous record high, around the $2,956 region, could be seen as a fresh trigger for bulls. That said, the Relative Strength Index (RSI) on the daily chart remains close to the overbought territory and makes it prudent to wait for some near-term consolidation or a modest pullback before the next leg up. The broader setup, however, suggests that the path of least resistance for the Gold price remains to the upside and supports prospects for an extension of a nearly three-month-old well-established uptrend.
In the meantime, any meaningful corrective slide is more likely to attract fresh buyers near the $2,956 area, below which the Gold price could drop to the $2,930-2,928 horizontal resistance breakpoint, now turned support. The latter should act as a key pivotal point and a convincing break below might prompt some technical selling, which should pave the way for deeper losses. The XAU/USD pair might then accelerate the fall towards the $2,900 round figure en route to the $2,880 region, or the weekly low touched on Tuesday.
