Gold prices (XAU/USD) have relinquished a significant portion of their intraday gains, pulling back from a fresh all-time high during the early European session on Tuesday. Despite the retreat, the precious metal remains comfortably above the $2,900 mark, supported by ongoing concerns over a potential global trade war.
The catalyst for this market shift came from US President Donald Trump’s recent tariff announcements, which included a 25% tariff on metal imports and a plan to impose reciprocal tariffs on other countries. These protectionist policies have further fueled fears about escalating geopolitical risks, driving demand for gold as a traditional safe-haven asset.
Additionally, there are growing expectations that Trump’s tariffs could lead to higher inflation in the US, benefiting gold, often viewed as a hedge against rising prices. These concerns, coupled with the continued strength of the US labor market, have raised speculations that the Federal Reserve (Fed) may hold interest rates steady in the near future. This has contributed to a strengthening US Dollar (USD), which rose to a one-week high, potentially limiting further upward momentum for gold.
US Dollar Gains While Profit-Taking Weighs on Gold
On Monday, President Trump signed two proclamations imposing a 25% tariff on metals and ending all exclusions on steel and aluminum tariffs initially set during his previous term. He also hinted at upcoming reciprocal tariffs on other nations, which fueled a fresh surge in gold prices during the Asian trading session on Tuesday.
In addition to the trade tensions, Trump’s comments on Middle East issues added further uncertainty, particularly his warning regarding Hamas hostages and the potential cancellation of the Israel-Hamas ceasefire. These developments further propelled demand for gold, traditionally sought after in times of uncertainty.
However, the USD’s rally, driven by fears that inflationary pressures from tariffs might prompt the Fed to maintain its hawkish stance, has dampened gold’s appeal. With overbought conditions on the daily chart, this has led to some profit-taking and a temporary pullback in gold prices, as traders reposition ahead of Federal Reserve Chair Jerome Powell’s testimony in Congress. Powell’s remarks are anticipated to provide clues about the future direction of US monetary policy, influencing both the USD and gold.
Technical Analysis: Gold Support and Resistance Levels
On the technical front, if gold dips below the $2,900 mark, support is expected near the $2,886-$2,882 range. A further decline could extend toward the $2,855-2,852 zone, with the key support around $2,800 acting as a pivotal level. A break below $2,800 could signal deeper losses for the precious metal.
Conversely, resistance is likely near the $2,842-2,843 level, with the overbought Relative Strength Index (RSI) suggesting that bulls may pause at this point. A period of consolidation or a modest pullback could provide an opportunity for positioning ahead of the next potential price move.
Despite the recent pullback, the overall technical outlook suggests that gold’s upward trend remains intact, with the path of least resistance still leaning toward further gains in the medium term.
Conclusion
In conclusion, while gold prices have experienced a temporary pullback from their all-time high, the broader market dynamics continue to favor the precious metal. Ongoing geopolitical risks, concerns over a global trade war, and potential inflationary pressures from protectionist policies are expected to maintain gold’s appeal as a safe-haven asset. Additionally, speculation around the Federal Reserve’s interest rate decisions, influenced by a resilient labor market and inflationary concerns, could continue to provide support for gold in the near term.
Technically, the metal remains in an uptrend, with key support levels providing opportunities for dip-buying. As the market awaits further developments, particularly Federal Reserve Chair Jerome Powell’s testimony, gold is likely to retain its bullish momentum, barring any significant changes in economic or political conditions. The outlook for gold remains positive, with the possibility of further gains as global uncertainties persist.