Gold prices (XAU/USD) continued to lose ground during the first half of the European session on Thursday, dropping to a two-week low near the $2,880 region. A modest increase in U.S. Treasury bond yields has helped the U.S. Dollar (USD) recover from its recent lows, exerting downward pressure on gold. This, combined with a generally positive sentiment surrounding equity markets, has contributed to the decline of the precious metal.
While the strengthening USD and rising bond yields weigh on gold prices, uncertainty over U.S. President Donald Trump’s tariff policies and ongoing trade war fears are causing some caution among bearish traders. The question of whether gold has reached its peak in the near term remains uncertain. Additionally, expectations that the U.S. Federal Reserve (Fed) may further cut interest rates, as concerns about a slowing U.S. economy persist, could limit the losses for gold, which does not yield interest. Traders are now eyeing the upcoming U.S. economic data for fresh market direction.
Gold Under Pressure From U.S. Dollar and Bond Yields
The U.S. Dollar continues to build on its overnight bounce from a recent 11-week low, supported by a modest rise in U.S. Treasury bond yields. This provides some downward pressure on gold prices during the Asian session. On the political front, President Trump fueled hopes for a delay in new tariffs on imports from Mexico and Canada, which were previously set to take effect on March 4. He indicated the new tariff deadline could shift to April 2. However, a White House official clarified that the March 4 deadline remains intact, pending a review of actions to curb migration into the U.S.
Additionally, President Trump announced that a 25% tariff on European Union imports is forthcoming, which has added further uncertainty and could ultimately support demand for gold as a safe-haven asset.
Interest Rate Cuts by Fed Could Limit Losses for Gold
Rising bets on additional interest rate cuts by the Federal Reserve this year are linked to recent U.S. economic data, which has raised concerns about a slowing economy. Atlanta Fed President Raphael Bostic suggested that the Fed may keep rates unchanged to continue applying downward pressure on inflation. The central bank’s stance on inflation, which remains high despite recent progress, will be closely watched in the coming months.
The focus now turns to the upcoming U.S. Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred measure of inflation, scheduled for release on Friday. This data could provide further guidance on the central bank’s future monetary policy. Additionally, Thursday’s U.S. economic docket—featuring GDP data, durable goods orders, pending home sales, and jobless claims—may offer short-term market movements.
Technical Outlook: Key Support Levels for Gold
From a technical standpoint, the $2,888 level, which was tested earlier in the week, is expected to act as immediate support for gold prices. Below that, the $2,878 and $2,860-$2,855 regions will be key levels to watch. If these support levels fail to hold, gold prices could experience a more pronounced decline, potentially heading toward the $2,834 level and, ultimately, the $2,800 mark.
On the upside, a move above the $2,920 resistance level could trigger selling near the $2,930 region, the recent swing high. A sustained rally beyond this point could propel gold towards the $2,950-$2,955 area, which would take it closer to its record high.
Conclusion
The gold market remains sensitive to a combination of factors, including U.S. bond yields, the strengthening dollar, and the potential for further Fed rate cuts. As traders await upcoming U.S. economic data and key inflation measures, gold’s price movement will likely continue to be influenced by these broader economic developments. While the precious metal faces pressure from stronger U.S. financial indicators, uncertainties around trade policies and geopolitical risks could offer support, limiting potential declines.