Gold (XAU/USD) continues to exhibit a positive bias, trading near its highest level since November 1, 2024, during the early European session. The primary factors driving this surge include ongoing uncertainty around US President Donald Trump’s trade policies, which are fueling haven demand for gold. Additionally, market expectations that the Federal Reserve (Fed) will cut interest rates twice this year are providing further support to the non-yielding yellow metal.
Despite the optimism surrounding gold, the upbeat market mood, coupled with rebounding US Treasury bond yields and a modest recovery in the US Dollar (USD) from a two-week low, has acted as a headwind for gold prices. Nevertheless, the overall fundamental backdrop remains tilted in favor of bullish traders, suggesting that any corrective pullback in gold prices may be short-lived, and buying opportunities could arise.
Technical Outlook: Breakout Momentum and Bullish Bias
Gold bulls have gained the upper hand, especially after the breakout above the $2,720 resistance zone. Technical indicators show that oscillators are firmly in positive territory and are not yet in the overbought zone, signaling further potential for upward movement. If gold sustains strength beyond the $2,748-$2,750 range, it could target new highs, potentially challenging the all-time peak around $2,790, reached in October 2024.
Potential Support Levels and Risks
On the downside, any pullback from current levels is likely to find strong support near the $2,725-$2,720 region. If gold breaks below the $2,700-$2,690 area, there could be further downside risk, with the price potentially moving towards the $2,660 zone. This area coincides with the 100-day Exponential Moving Average (EMA) and an ascending trend-line from the November low, which could act as a key support level and help determine the next direction for gold prices.
Conclusion
Gold’s positive momentum is expected to continue in the near term, driven by trade tensions and the Fed’s rate cut expectations. While there are headwinds from a recovering USD and bond yields, the technical outlook remains bullish. Any short-term pullback should present buying opportunities, with key support levels offering a cushion for further gains. Gold is poised for potential new highs as it continues to ride on favorable fundamental and technical factors.