Gold price (XAU/USD) is currently in a bullish consolidation phase, hovering above the $2,770 level. The price reached a multi-month high earlier today but has since entered a period of consolidation. This pullback follows a noticeable decline in the US Dollar (USD), which dropped to a one-month low due to falling US Treasury bond yields. The recent price action comes amid market reactions to US President Donald Trump’s comments about a potential trade deal with China and growing speculation that the Federal Reserve (Fed) might cut interest rates further by the end of the year. These factors are supporting the appeal of gold as a safe-haven asset.
Protectionist Policies and Economic Uncertainty Fuel Gold Demand
Trump’s protectionist policies, particularly regarding tariffs, continue to create economic uncertainty, driving flows toward the safety of gold. The market remains concerned about the broader implications of these policies on global trade. While equity markets are showing a generally positive tone, traders are hesitant to make large bullish bets on gold, given that the metal has reached near-overbought conditions on short-term charts. Despite this, gold remains on track to close the week with its fourth consecutive gain, as traders look to key economic reports like the US flash PMIs for more insight into the global economic landscape.
US Dollar Weakness and Fed Rate Cut Expectations Support Gold
The slide in the US Dollar has been driven by Trump’s remarks, in which he stated that he would press the Federal Reserve to cut interest rates further. As inflationary pressures subside in the US, the markets are pricing in the possibility of two interest rate cuts by the Fed before the end of 2025. This has created a supportive environment for gold, as lower interest rates decrease the opportunity cost of holding non-yielding assets like gold. Additionally, Trump’s comments on the potential for a trade deal with China, alongside his desire to avoid imposing additional tariffs, have eased some of the inflationary concerns and provided further support for gold.
Technical Analysis
From a technical standpoint, gold has recently broken through the $2,720-$2,725 supply zone, but the Relative Strength Index (RSI) is nearing overbought levels. This suggests that a short-term pullback or consolidation could be in store before gold continues its upward trajectory. The immediate resistance for gold stands at $2,790, a level that marks the all-time high for the yellow metal. Traders will be looking for either a breakout above this resistance or a healthy pullback to enter new positions.
Support Levels and Possible Pullback Scenarios
On the downside, immediate support for gold is seen at the $2,760-$2,758 range. A move below this zone could lead to a retest of the $2,736-$2,735 region. Any further pullback is likely to find strong support near the $2,725-$2,720 area, which should act as a pivotal point for future price action. If gold falls below this support level, it could shift the bias to bearish, leading to deeper losses. However, if the support holds, it could present another buying opportunity for traders looking to enter at lower levels.
Conclusion
Gold remains in a bullish trend despite the recent consolidation, supported by a weaker USD, expectations of Fed rate cuts, and ongoing concerns about Trump’s protectionist policies. While the metal is currently facing resistance near its all-time highs, technical indicators suggest that a modest pullback or consolidation could provide further opportunities for traders. The coming economic reports, including the US PMIs, will likely provide more clarity and potentially drive the next move in gold prices.