Gold prices (XAU/USD) are maintaining modest intraday gains during the first half of Friday’s European session, staying close to the record highs reached earlier this week. Geopolitical tensions, particularly the ongoing US-China trade war, continue to drive demand for gold as a safe-haven asset, while concerns over the economic impact of US President Donald Trump’s trade policies add to market unease.
The US Dollar struggles to gain momentum amid expectations that the Federal Reserve may lower interest rates twice this year, a sentiment that has led to a sharp decline in US Treasury yields. This environment has further supported gold’s appeal as a non-yielding asset ahead of the critical US Nonfarm Payrolls (NFP) report.
Gold’s Support Factors Remain Strong
China’s recent announcement of tariffs on US goods, in retaliation for President Trump’s 10% levy on Chinese imports, has intensified the trade conflict between the two largest global economies, providing continued support for gold prices.
In economic news, the US Department of Labor reported a rise in unemployment claims, with 219,000 new filings for the week ending February 1, up from 208,000 the previous week. This has added to concerns about the US labor market.
Additionally, US Treasury Secretary Scott Bessent’s comments on the Federal Reserve’s stance on interest rates and the ongoing efforts to reduce 10-year Treasury yields have helped strengthen the bullish sentiment around gold.
The yield on the benchmark 10-year US government bond recently dropped to its lowest level since December 12, fueled by expectations that the Federal Reserve will cut rates by the end of 2025, further benefiting gold.
Mixed statements from Federal Reserve officials have kept market sentiment uncertain. Chicago Fed President Austan Goolsbee noted inflation concerns, while Dallas Fed President Lorie Logan pointed out progress on inflation but stressed the strength of the US labor market, which makes rate cuts less likely in the immediate future.
Market Eyes US Nonfarm Payrolls Report
Investors are now focused on the upcoming US Nonfarm Payrolls report, which is expected to show an increase of 170,000 jobs in January, down from the 256,000 added in December. The unemployment rate is expected to remain steady at 4.1%. The report will influence market expectations for the Federal Reserve’s interest rate policies, which will play a critical role in determining the direction of gold prices.
Technical Outlook for Gold
Technically, gold’s recent price action supports a positive near-term outlook, although the Relative Strength Index (RSI) indicates slightly overbought conditions. Traders may wait for consolidation before positioning for further gains. Support levels are seen around $2,855 and $2,834, with further support at $2,815-2,714. If gold breaks below $2,800, it could face technical selling pressure and move toward the $2,773-2,772 resistance level. A break below this could lead to a deeper corrective decline.
Conclusion
Gold prices remain supported by ongoing geopolitical tensions, mixed economic data, and expectations of Federal Reserve rate cuts. The US NFP report will be key in shaping market sentiment and determining the next move for gold. Investors are closely monitoring both economic data and technical levels to gauge future price movements.