Gold prices (XAU/USD) remain in a consolidation phase at record levels, struggling for meaningful traction despite strong support from ongoing geopolitical tensions and economic uncertainties. Concerns about U.S. President Donald Trump’s trade tariffs, which could trigger a global trade war, continue to bolster gold as a safe-haven asset. Additionally, fears of rising inflation make gold an attractive hedge against increasing prices. Meanwhile, the U.S. Dollar remains under pressure, recently dropping to its lowest level since December 10.
Inflation Fears Reinforce Gold’s Appeal
Trump’s tariff plans are fueling concerns about potential economic fallout, strengthening gold’s position. The imposition of hefty tariffs on steel, aluminum, and Chinese imports, coupled with the announcement of additional tariffs, has sparked market uncertainty. This economic tension, along with recent data pointing to weaker U.S. economic growth, has led to a dip in the U.S. Dollar.
The University of Michigan’s report showing declining consumer sentiment adds to the uncertainty, with inflation expectations rising to their highest levels in recent months. These factors further support gold as a hedge against inflation. However, the market remains cautious as stronger U.S. inflation figures and hawkish Federal Reserve minutes suggest interest rates may stay high, limiting gold’s upside potential.
The upcoming release of the U.S. Personal Consumption Expenditures (PCE) Price Index will be pivotal in shaping expectations for future Fed rate decisions. Additionally, Q4 GDP data and Durable Goods Orders could offer further direction for gold prices. Remarks from key policymakers could also influence U.S. Dollar demand and, by extension, gold’s price.
Technical Outlook for Gold
The monthly gold price chart shows a classic cup-and-handle pattern, suggesting a potential continuation of the uptrend. A breakout above the $2,075 level confirmed this bullish formation, leading to strong upward momentum.
With previous resistance levels now acting as support, gold’s technical strength remains intact. The 2024 price action suggests a retest of the breakout zone before continuing higher. Projections for 2025 indicate a price range of approximately $3,000 to $3,200, with the possibility of further upside.
Conclusion
Gold prices remain supported by strong demand for safe-haven assets amid trade tensions, inflation fears, and a weaker U.S. Dollar. However, expectations of prolonged high interest rates from the Federal Reserve could limit further gains. Key upcoming economic data, including the PCE Price Index and GDP figures, will provide further insights into gold’s next move. Traders should remain vigilant for potential corrections and key support levels before entering new positions.