- Gold prices hold optimistic bias in the midst of worry about Trump’s tariffs and the world trade war.
- US bond returns weigh the US dollar and provide additional support for precious metals.
- Hawkian Outlook on the Fed may limit Xau/USD couples under slightly covered conditions.
Gold price (XAU/USD) gains fresh momentum during the Asian session on Thursday, staying near its record high from the previous day. Renewed concerns about a global trade war, sparked by former U.S. President Donald Trump’s tariff threats on imports, continue to drive demand for the safe-haven metal. Additionally, risk aversion in the market has led to a decline in U.S. Treasury bond yields, further supporting the appeal of non-yielding gold.
Moreover, a softer U.S. Dollar (USD) adds to the bullish sentiment around gold. However, the Federal Reserve’s hawkish stance, reinforced by Wednesday’s FOMC meeting minutes, suggests an extended pause on interest rates. This could provide support for U.S. bond yields and the Greenback, potentially limiting further upside for XAU/USD, especially as the daily chart indicates slightly overbought conditions.
Gold Price Rises as Safe-Haven Demand Grows Amid Escalating Global Trade Tensions
- On Wednesday, former U.S. President Donald Trump announced plans to impose significant tariffs on various products in the coming month or sooner. This move raises concerns about escalating trade disputes while reinforcing demand for safe-haven assets like gold.
- In an interview with Fox News, U.S. Commerce Secretary Howard Lutnick stated that Trump’s broader objective includes eliminating the Internal Revenue Service (IRS) and shifting the tax burden onto external entities. Meanwhile, Trump hinted at the possibility of negotiating a new trade agreement with China.
- The U.S. Dollar has struggled to maintain its recent recovery, following a two-day rebound, as declining Treasury bond yields exert fresh pressure. This weakness in the greenback further supports the appeal of gold.
- Minutes from the Federal Open Market Committee’s (FOMC) January meeting, released Wednesday, reflected policymakers’ cautious approach due to economic uncertainty. Officials indicated that future rate cuts would be carefully considered.
- Federal Reserve Vice Chairman Philip Jefferson remarked that while the U.S. economy remains robust, the labor market is steady, and inflation has moderated, it is still above target, making the journey to 2% inflation potentially volatile. Similarly, Chicago Fed President Austan Goolsbee acknowledged the decline in inflation but emphasized that it remains high. He suggested that interest rates could be reduced further once inflation stabilizes. However, these comments have done little to bolster the U.S. Dollar or weaken gold’s upward momentum.
- Looking ahead, Thursday’s U.S. economic calendar includes key reports such as the Weekly Initial Jobless Claims and the Philly Fed Manufacturing Index. Additionally, speeches from influential FOMC members may influence the direction of both the U.S. Dollar and gold prices (XAU/USD).
- Investors will also turn their attention to Friday’s flash global PMI data, which could offer valuable insights into worldwide economic conditions and impact the demand for safe-haven assets.
Gold Price Poised for Further Consolidation Before Next Rally; Bullish Outlook Intact
From a technical standpoint, the daily Relative Strength Index (RSI) remains above 70, signaling overbought conditions and caution for bullish traders. This suggests that Gold prices may continue consolidating within a range established over the past week. However, the broader trend remains firmly bullish, indicating that the path of least resistance for XAU/USD is still upward. A decisive break above the $2,945–2,950 zone would confirm a breakout from the short-term range, setting the stage for an extension of the uptrend that has been in place for the last two months.
On the downside, any retracement below the immediate support at $2,928 could attract buying interest around the $2,918 level, which aligns with the previous session’s low. Further declines may be limited to the $2,900 psychological mark. Below this, the next key support lies at $2,880, and a sustained break below this level could drive prices toward $2,860–2,855, with additional downside potential toward $2,834. If selling pressure persists, gold could slide further to $2,815 before testing the critical $2,800 level and deeper support around $2,785–2,784.
