Gold prices (XAU/USD) have remained confined within a narrow range near the weekly high during the first half of the European session on Wednesday, as traders await a key catalyst that could drive the next major move. The focus is now fixed on the upcoming release of the US Consumer Price Index (CPI), which is expected to influence the Federal Reserve’s rate-cut strategy. The resulting shift in US Dollar (USD) demand could provide momentum for the non-yielding yellow metal.
Fed Rate-Cut Speculations and Global Risks Support Gold Prices
In the meantime, traders have priced in the possibility that the Federal Reserve will implement several interest rate cuts this year, driven by concerns about a potential US economic slowdown fueled by tariff-related disruptions and signs of a cooling labor market. These fears, combined with ongoing uncertainties surrounding US President Donald Trump’s policies and the global trade war, continue to bolster gold as a safe-haven asset. Despite this support, the lack of significant buying pressure calls for caution among overly aggressive bullish traders.
Trade War and US Government Shutdown Fears Impact Market Sentiment
US President Trump added fuel to the trade war rhetoric on Tuesday by announcing plans to double the proposed tariff increases on steel and aluminum imports from Canada to 50%, which provided a temporary boost to gold prices. However, the market saw a reversal of this move after Ontario Premier Doug Ford suspended a 25% surcharge on electricity sold to the US, easing some of the tensions.
In addition, a Republican spending bill narrowly passed in the US House of Representatives, preventing a government shutdown on March 14 and ensuring government operations through September. The bill now moves to the Senate, where it requires support from at least seven Democrats to avoid a filibuster and secure passage.
On the geopolitical front, Ukraine has shown willingness to accept the US proposal for a 30-day ceasefire with Russia after bilateral talks in Jeddah, Saudi Arabia. While the US has yet to hear Russia’s response to the proposal, this development could shift global risk sentiment, potentially acting as a headwind for gold.
Fed Rate-Cut Speculations Continue Amid Economic Uncertainty
Over the weekend, President Trump acknowledged the potential for a US recession and flagged concerns about economic turbulence tied to his policy agenda. This, coupled with signs of a weakening US labor market, has led traders to speculate that the Federal Reserve will resume its rate-cutting cycle. Market expectations now include three 25-basis-point rate cuts by the end of 2025, which could keep the US Dollar under pressure and benefit gold prices.
As a result, while the US Dollar touched its lowest level since mid-October on Tuesday, traders remain cautious ahead of the CPI report. The inflation data could determine the Fed’s next move and offer crucial momentum for gold prices.
Gold Price Technical Outlook: $2,928-2,930 Key Resistance Level
From a technical standpoint, gold bulls will need a decisive breakout above the $2,928-2,930 range before positioning for further upside. Such a move could propel gold back toward its all-time high of around $2,956, seen on February 24. If buying momentum continues, it could signal the resumption of the established uptrend, supported by positive oscillators on the daily chart.
Conversely, if gold weakens below the $2,900 mark, immediate support is likely at the $2,880 region, which coincides with the weekly low. Additional declines could push prices toward the $2,860 level, followed by the February swing low near $2,833-2,832, with a further drop to $2,800 appearing as a possibility.
Conclusion
As traders await the crucial US CPI data, gold prices remain in a holding pattern, with potential volatility depending on the inflation figures. The ongoing global trade risks, US economic uncertainty, and Fed rate-cut speculations continue to provide support for gold, but cautious market sentiment means the next directional move is still uncertain. Traders should remain vigilant for a break above the $2,928-2,930 resistance level for potential upside, or look for further downside risk if gold fails to hold its ground.