Gold prices (XAU/USD) rose during the first half of the European session, looking to build on a late rebound from the $3,000 psychological support level seen last Friday. The US Dollar (USD) opened the week weaker, pausing a three-day recovery from a multi-month low, amid expectations that the Federal Reserve (Fed) will soon resume its rate-cutting cycle. This expectation is seen as a key factor providing upward momentum for the non-yielding precious metal.
Global risk sentiment received a modest boost after reports emerged suggesting that US President Donald Trump’s proposed reciprocal tariffs would be narrower and less stringent than initially anticipated. This, coupled with a moderate rise in US Treasury bond yields, could temper aggressive bullish bets on gold. Traders are now turning their attention to the release of flash US PMIs and speeches from key Federal Open Market Committee (FOMC) members for short-term trading cues.
Market Movers and Key Influences
Reports over the weekend indicated that President Trump plans to implement a more targeted approach to the reciprocal tariffs set to take effect on April 2. This shift has encouraged investor appetite for riskier assets, putting downward pressure on the safe-haven appeal of gold as the new week begins.
In addition, US delegations have been engaged in peace talks with Ukrainian officials and are scheduled to meet with Russian officials for further negotiations. Earlier this month, Trump and Russian President Vladimir Putin agreed to a 30-day pause on Russian strikes targeting Ukrainian energy facilities.
The US Dollar maintained its strength near a one-and-a-half-week high achieved on Friday, following the Federal Reserve’s less dovish stance. The Fed’s outlook includes the expectation of two 25-basis-point rate cuts by year-end, which is acting as a headwind for gold.
Fed Chair Jerome Powell warned last week that tariffs could dampen economic growth, further weighing on the USD. Meanwhile, traders are still expecting the US central bank to lower borrowing costs during its policy meetings in June, July, and October, which could limit USD strength and provide support for the XAU/USD pair.
Tensions in the Middle East also contributed to market uncertainty. Israel continued its heavy strikes on Gaza, bombing a major hospital in the region and killing Hamas leader Ismail Barhoum. Meanwhile, Iran-backed Houthis in Yemen fired a ballistic missile at Israel, which was intercepted by Israeli defense systems. The US military also carried out airstrikes in Yemen’s northern province of Saada. Additionally, the Houthis claimed responsibility for attacks on an Israeli aircraft carrier and Ben Gurion Airport, raising concerns of further escalation in the region.
Looking Ahead: Flash PMIs and Economic Data
As the week progresses, traders will closely watch the release of global flash PMIs, which will offer fresh insights into the global economic outlook and could influence market sentiment. The main focus, however, will remain on the US Personal Consumption and Expenditure (PCE) Price Index set for release on Friday, a key inflation measure closely monitored by the Federal Reserve.
Technical Outlook: Gold’s Path Ahead
From a technical perspective, gold prices appear poised to appreciate further as long as they remain above the $3,000 support level. A pullback could attract buyers near this key level. If the price drops below $3,000 decisively, technical selling could take gold toward the $2,982-$2,978 range, with further support near the $2,956-$2,954 zone.
On the upside, gold faces immediate resistance around the $3,057-$3,058 range, where it touched its all-time high last week. The daily Relative Strength Index (RSI) has pulled back from overbought territory, indicating that follow-through buying could trigger further bullish momentum. This would open the door for an extension of the uptrend seen over the past three months.