Gold prices (XAU/USD) are holding modest intraday gains during Thursday’s European session, but the precious metal lacks strong momentum and remains below the record high reached earlier this week. Investor concerns over US President Donald Trump’s trade tariffs, which could lead to a global trade war, continue to support gold as a safe-haven asset. Additionally, a dip in US Treasury bond yields has pushed the US Dollar (USD) to a weekly low, further benefiting gold.
The threat of Trump’s protectionist policies exacerbating inflation in the US is also seen as a bullish factor for gold, which is considered a hedge against rising prices. Meanwhile, Wednesday’s stronger-than-expected US Consumer Price Index (CPI) has reaffirmed expectations that the Federal Reserve (Fed) will maintain its hawkish stance and keep interest rates steady for an extended period. This has capped gold’s upside, with traders now focusing on the upcoming US Producer Price Index (PPI) report.
Gold Price Bulls Reluctant Amid Fed Rate Cut Bets Easing
Despite the initial market reaction to the latest US inflation data, gold’s upward movement has been restrained by concerns over US President Trump’s trade tariffs. On Monday, Trump signed executive orders imposing 25% tariffs on steel and aluminum imports into the US, promising additional tariffs to match those imposed by other countries on US products.
According to the US Bureau of Labor Statistics, the headline US CPI rose by 0.5% in January, the highest increase since August 2023, pushing the annual rate up to 3% from 2.9% in December. Core CPI, which excludes food and energy prices, rose 0.4% on a monthly basis and climbed 3.3% year-on-year, surpassing expectations and highlighting persistent inflationary pressures.
Fed Chair Jerome Powell emphasized that the battle against rising inflation is not yet over, meaning rate cuts will have to wait until inflation shows signs of returning to the Fed’s 2% target. Atlanta Fed President Raphael Bostic noted that the labor market is strong and GDP remains resilient, but inflation requires ongoing monitoring.
As a result, market participants now expect only one rate cut by the end of the year, leading to a significant rise in the 10-year US government bond yield. The US Dollar (USD) has struggled to attract buyers, lingering near the lower end of its weekly range, which has continued to provide support for gold.
Technical Outlook: Dips Could Be Seen as Buying Opportunity
From a technical standpoint, the daily Relative Strength Index (RSI) is in overbought territory, suggesting caution before betting on further gains. Bulls may face resistance near the $2,942-$2,943 area, the all-time high reached earlier this week, which is likely to act as a strong barrier.
If gold weakens and falls below the $2,900 level, the next support could be found around $2,864, followed by intermediate support near $2,834-$2,832. A more pronounced corrective pullback could push gold towards the $2,800 mark.
Conclusion
Gold prices are holding steady despite a lack of strong bullish momentum, as investor sentiment remains cautious ahead of the US PPI report. The ongoing concerns about potential global trade tensions and inflationary pressures continue to support gold as a safe-haven asset, while the market adjusts to the Federal Reserve’s stance on interest rates. Although gold has been capped by expectations of a prolonged hawkish Fed, its technical outlook remains constructive, and any potential dips may present buying opportunities for investors. With key resistance near the record high of $2,943 and support levels around $2,864 and $2,832, gold’s near-term price action will likely hinge on upcoming economic data and the Fed’s policy trajectory.