Gold (XAU/USD) continues to maintain a strong upward trajectory, trading just below $3,400 during the first half of the European session on Monday, near its all-time high. The ongoing uncertainty surrounding US President Donald Trump’s trade policies has fueled concerns of a potential US recession, which in turn has bolstered demand for the safe-haven asset.
Trump’s fluctuating tariff announcements have undermined confidence in the US economy, with tariffs of up to 145% imposed on certain Chinese goods, while China has retaliated with tariffs of 125% on US products. These escalating trade tensions, combined with the likelihood of more aggressive policy easing from the Federal Reserve, have pushed the US Dollar (USD) to its lowest level since April 2022. This has further supported gold, a non-yielding asset, despite overbought conditions on short-term charts.
Tariff Uncertainty and Recession Fears Push Gold to Record Highs
The fear of economic repercussions from Trump’s trade tariffs and the worsening US-China trade war has propelled gold to new heights. The recent tariff hikes, including duties up to 245% on certain Chinese goods, have escalated tensions between the world’s two largest economies, creating a sense of uncertainty in global markets.
Amid these concerns, the US Dollar has been under pressure, further benefiting gold. Despite Federal Reserve Chair Jerome Powell’s hawkish remarks on monetary policy, which signaled the Fed’s readiness to await more clarity before adjusting interest rates, traders are still pricing in the possibility of a rate-cutting cycle resuming in June. This has contributed to increased flows into gold as investors seek safer assets.
Additionally, while geopolitical tensions have shown some signs of easing—such as the US and Iran agreeing to begin expert-level discussions for a potential nuclear deal and a brief ceasefire in Ukraine brokered by Russia—these developments have not significantly reduced demand for gold, with the metal continuing to be seen as a safe-haven asset.
Technical Outlook: Gold Bulls Retain Control, but Overbought Conditions Loom
From a technical standpoint, the persistent buying momentum indicates a positive outlook for gold in the near term. However, the daily Relative Strength Index (RSI) remains above the 70 mark, signaling that the market may be overbought and potentially due for a breather. Traders may consider waiting for some consolidation or a mild pullback before positioning for further gains in gold.
Support for gold is expected near the $3,350 level, followed by the Asian session low around $3,329-$3,328. A breakdown below this region could trigger a decline towards the $3,300 level, with Friday’s swing low near $3,284 serving as a key pivot point. A decisive break below this level could open the door for deeper losses.
Outlook and Market Focus
There is little significant economic data scheduled for release from the US on Monday, although a speech by Chicago Fed President Austan Goolsbee may influence the USD. In the coming days, market attention will shift to the release of flash PMIs on Wednesday, which could provide fresh insights into the health of the global economy and further impact gold’s price trajectory.
Despite the potential for short-term pullbacks, the broader trend remains bullish for gold, driven by ongoing economic and geopolitical uncertainties.