- Gold Price Sees Increased Buying Interest as Concerns Over US Tariffs Boost Safe-Haven Appeal.
- Speculation about more significant rate cuts by the Fed puts pressure on the USD, providing support for the commodity.
- A modest improvement in global risk sentiment could limit additional gains for the XAU/USD pair.
Gold prices (XAU/USD) gained some momentum during the Asian session on Tuesday, breaking a three-day losing streak that saw prices drop to nearly a four-week low around $2,957-2,956 the day before. The recent announcement of sweeping reciprocal tariffs by US President Donald Trump has raised concerns about a potential global trade war, which could lead to a recession. This uncertainty continues to drive demand for safe-haven assets, supporting gold as it avoids a sharp decline from last Thursday’s record high.
In addition, traders are increasingly betting on several interest rate cuts by the Federal Reserve in 2025, driven by fears of an economic slowdown triggered by the tariffs. This has kept the US Dollar (USD) from fully recovering from its recent multi-month low, further supporting the price of gold. However, any slight improvement in global risk sentiment could pose a challenge for gold’s upward movement. Market participants are also looking ahead to the upcoming FOMC meeting minutes and US consumer inflation data, which are scheduled for release on Wednesday and Thursday, respectively.
Gold Price Sees Safe-Haven Demand as USD Weakens
- Concerns persist among investors that the recent trade tariffs imposed by US President Donald Trump could escalate into a global trade conflict, potentially harming the global economy. Combined with renewed selling of the US Dollar, these factors have driven an increase in demand for gold, a safe-haven asset, during Tuesday’s Asian trading session
- Market participants appear increasingly confident that the Federal Reserve will soon begin reducing interest rates, driven by concerns over the potential economic impact of Trump’s bold trade policies. In addition, Trump has urged the Fed to lower rates promptly, asserting that the US economy is currently in a robust position.
- Fed Governor Adriana Kugler said on Monday that the US central bank’s focus should be on keeping inflation in check and noted that short-term inflation expectations have risen but remain well-anchored in the longer term. She further added that Fed policymakers are still committed to the 2% inflation target.
- Current market expectations suggest that the US central bank may reduce borrowing costs once more at the upcoming June policy meeting, with the possibility of up to four rate cuts by the end of the year.
- Traders are set to closely examine the minutes from the Federal Reserve’s recent policy meeting, which will be released on Wednesday. In addition, the upcoming US Consumer Price Index (CPI) report on Thursday and the Producer Price Index (PPI) on Friday will offer insights into the potential direction of future rate cuts. These events are expected to have a significant impact on the USD and the XAU/USD currency pair.
Gold Price Faces Potential Resistance at $3,020 Amid Bearish Technical Signals
From a technical standpoint, oscillators on the daily chart have recently started to show some negative momentum. However, the resilience shown overnight near the 61.8% Fibonacci retracement level of the February-April rally, followed by a subsequent upward movement, should prompt caution for bearish traders. This mixed setup suggests that gold may continue to find support near Monday’s low around the $2,957-$2,956 range. Below that, the 50-day Simple Moving Average (SMA), currently around the $2,948-$2,947 area, offers further support. A decisive break below this level could signal a continuation of the recent sharp pullback from last Thursday’s all-time high.
On the other hand, any further upward movement could face significant resistance near the $3,020 level. If the price manages to break above this zone, gold could aim for the $3,055-$3,056 resistance area. Continued buying pressure could trigger a fresh rally, with bullish traders targeting a potential return to the $3,100 level, while the $3,075-$3,080 region might act as an intermediate hurdle.
