- Gold Hits New Record High as Intensifying US-China Trade Tensions Fuel Safe-Haven Demand
- Concerns over a potential US recession, expectations of a Federal Reserve rate cut, and a weakening US dollar are all contributing to the strength of the XAU/USD pair
- An improvement in risk sentiment could limit further gains in the precious metal, as the daily RSI shows signs of being slightly overbought.
Gold (XAU/USD) has entered a bullish consolidation phase, trading within a range around the $3,230 mark, just below a fresh all-time high reached during Monday’s Asian session. The upward momentum pauses as bulls take a break, with the daily chart showing slightly overbought conditions. However, the overall fundamental picture suggests that the path of least resistance for gold remains to the upside. Although US President Donald Trump announced a temporary halt on reciprocal tariffs last week, US-China trade tensions continue to escalate, maintaining pressure on investor sentiment and supporting demand for the safe-haven asset.
In addition, the recent sell-off in the US bond market has raised concerns about waning confidence in the US economy. Recent data from Thursday indicated a slowdown in US inflation to a six-month low in March, reinforcing expectations that the Federal Reserve will resume its rate-cutting cycle in the near future. With the Fed likely to reduce borrowing costs at least three times this year, the US Dollar (USD) has fallen to its lowest level since April 2022, further bolstering the case for gold, which benefits from a weaker dollar and lower interest rates.
Gold Prices Gain Traction Amid Escalating US-China Trade Tensions
- On Friday, China raised tariffs on U.S. imports to 125% in response to President Donald Trump’s decision to hike duties on Chinese goods to a total of 145%. This intensifies concerns in the market that the escalating trade dispute between the two largest economies could dampen global economic growth, further boosting demand for safe-haven assets like Gold, pushing its price to new all-time highs
- The recent surge in US Treasury yields points to investors moving away from US government bonds due to growing concerns about the US economy. Additionally, the potential for more aggressive policy easing by the Federal Reserve, supported by last week’s US consumer inflation data, continues to weigh on the US Dollar, providing further support for the commodity
- Traders are now pricing in 90 basis points of Fed rate cuts by year-end 2025, which might further contribute to driving flows towards the non-yielding yellow metal. Moreover, investors expect tariffs to push inflation higher in the coming months. This could further underpin the XAU/USD’s status as a hedge against rising prices and support prospects for a further near-term appreciation.
- This week, market participants will pay close attention to remarks from key FOMC members, including Fed Chair Jerome Powell on Wednesday, to gain insights into the potential future direction of rate cuts. Additionally, the release of the US monthly Retail Sales data, also scheduled for Wednesday, is expected to influence USD demand and could offer significant momentum for the precious metal later in the week.
Gold Prices Set for Consolidation as Daily RSI Shows Overbought Conditions Before Next Uptrend
From a technical standpoint, the daily Relative Strength Index (RSI) remains slightly above the 70 level, indicating that conditions may be somewhat stretched. As a result, it would be wise to wait for some short-term consolidation or a minor pullback before traders consider entering for a potential upward move. Any corrective decline could present a buying opportunity around the $3,200 mark, which may help cap downside risks near the $3,168-$3,167 area. This zone is expected to serve as a strong support and a crucial level for short-term traders.
