Gold (XAU/USD) remains strong near its weekly highs during the early European session on Thursday, with a further rise expected as global risk aversion drives demand for the safe-haven metal. The catalyst behind this move is U.S. President Donald Trump’s announcement of a 25% tariff on imported cars and light trucks, set to take effect next week. This intensifies fears of an escalating global trade war, diminishing investor appetite for riskier assets and boosting gold’s appeal.
In addition to trade tensions, the growing expectation that the Federal Reserve will soon resume its rate-cutting cycle, along with a modest pullback in the U.S. Dollar (USD) from a three-week high, further supports gold’s upward movement. However, the possibility of increased stimulus from China and a rise in U.S. Treasury bond yields could weigh on gold prices, as traders await fresh economic data from the U.S. to provide new direction.
Trade Jitters and Weaker USD Provide Support to Gold
The global risk sentiment was shaken by Trump’s announcement on Wednesday, with concerns over the impact of the new auto tariffs weighing heavily on investor sentiment. The uncertainty surrounding Trump’s upcoming reciprocal tariffs next week has revived demand for gold as a traditional safe-haven asset.
The U.S. Federal Reserve has also adjusted its growth outlook downward, influenced by the uncertainty surrounding Trump’s trade policies. The central bank has indicated that it plans to cut interest rates twice by 25 basis points in 2025, overshadowing the positive U.S. economic data released earlier this week. Despite a 0.9% rise in Durable Goods Orders for February and a 0.7% increase in Core Durable Goods—better than expected—gold continues to benefit from a weaker USD, which has retreated from its recent three-week high.
Federal Reserve officials have weighed in on the economic situation, with Chicago Fed President Austan Goolsbee suggesting that the next rate cut may take longer than expected due to economic uncertainty. Meanwhile, Minneapolis Fed President Neel Kashkari acknowledged progress in tackling inflation but emphasized that further work is needed to bring inflation back to the 2% target. St. Louis Fed President Alberto Musalem, however, stated that the Fed does not urgently need to cut rates as restrictive policy remains necessary to curb inflation, with tariffs potentially pushing prices higher.
Looking Ahead: U.S. Data and PCE Index in Focus
Traders are now focused on Thursday’s U.S. economic data, including final Q4 GDP figures, weekly jobless claims, and pending home sales. These reports, along with speeches from influential Fed members, will likely influence the USD and provide short-term opportunities for gold traders.
The key event to watch will be Friday’s release of the U.S. Personal Consumption Expenditure (PCE) Price Index, which could offer clues about the Fed’s future rate-cut path. This data will play a crucial role in shaping the next directional move for both the U.S. Dollar and gold.
Gold Price Poised to Test Record Highs
From a technical standpoint, gold remains poised to challenge its all-time high of around $3,057-$3,058, touched on March 20. The metal has shown resilience above the $3,000 psychological mark, with positive daily oscillators suggesting further buying momentum. A sustained move beyond the all-time peak could extend gold’s upward trend, which has been in place for several months.
On the downside, support is seen near the $3,020-$3,019 zone, followed by $3,000. A break below these levels could lead to further declines, with key support near $2,982-$2,978 and potentially down to $2,956-$2,954. If this lower support zone is broken, technical selling could push gold into deeper corrective territory.