Gold prices (XAU/USD) continued their descent on Tuesday, retreating from the record high reached the previous day. During the first half of the European session, gold dropped to the $2,929 region, reflecting some profit-taking in the absence of significant new economic triggers. However, analysts suggest that the intraday decline may remain limited, as concerns over the economic consequences of U.S. President Donald Trump’s protectionist trade policies could continue to fuel demand for the safe-haven metal.
Despite the drop, the pullback is not expected to be deep, as the U.S. dollar failed to capitalize on its overnight rebound, which had brought it to its lowest level since December 10. This lack of momentum for the dollar might offer support to gold, as the metal does not yield interest, making it attractive in times of economic uncertainty.
Trade Tensions and Fed Rate Cuts Keep Gold on the Rise
Gold traders are still facing fears of escalating trade tensions, particularly after President Trump reiterated on Monday that tariffs on imports from Canada and Mexico were proceeding as scheduled. Trump’s comments, which also indicated that reciprocal tariffs on other countries would continue, have sparked concerns that further trade conflict could weigh on the global economy. These fears are likely to keep gold in demand as investors seek a safe-haven asset.
Additionally, recent weak U.S. economic data has fueled speculation that the Federal Reserve could implement further interest rate cuts this year. Although Chicago Fed President Austan Goolsbee noted that the Fed is taking a “wait-and-see” approach, this uncertainty about future rate cuts continues to provide a cushion for gold prices, as they benefit from lower interest rates.
In another bullish sign for gold, the World Gold Council (WGC) reported that gold-backed exchange-traded funds (ETFs) saw their largest weekly inflows since March 2022. With the upcoming U.S. economic reports, including the Conference Board’s Consumer Confidence Index and Richmond Manufacturing Index, traders will likely remain focused on how these indicators might influence the dollar and, by extension, gold.
Gold’s Short-Term Outlook: Bullish Consolidation Ahead
Gold’s price action over the past week suggests a consolidation phase following the record high. While the Relative Strength Index (RSI) is nearing overbought territory at 70, indicating the potential for a short-term pullback, the overall bias remains positive. Traders are advised to wait for consolidation or a modest dip before positioning for further gains.
In the near term, support levels near $2,920 to $2,915 could attract dip-buyers, with additional support at the $2,900 and $2,880 regions. A decisive break below $2,880 could lead to a further decline, with targets around $2,860-$2,855 and a possible drop to the $2,800 mark.
Conclusion
Gold prices are experiencing a temporary pullback driven by profit-taking, but ongoing concerns over trade tensions and the Federal Reserve’s potential rate cuts continue to provide a strong foundation for upward movement. Traders will likely remain focused on upcoming U.S. economic data, with the PCE Price Index release later this week offering important clues about future Fed actions. The overall outlook for gold remains bullish, though some near-term consolidation is expected.