Gold prices (XAU/USD) maintained strong intraday gains through the early European session on Monday, hovering near their all-time peak, just above the $3,120 mark. This surge comes as uncertainty surrounding U.S. President Donald Trump’s proposed reciprocal tariffs, combined with rising recession fears, continues to weigh heavily on investor sentiment. These factors, alongside ongoing geopolitical tensions, have driven the safe-haven precious metal higher for the third consecutive day.
The market remains under pressure as concerns about the economic impact of tariff-driven slowdowns in the U.S. fuel speculation that the Federal Reserve may soon resume its rate-cutting cycle. This has contributed to a pullback in the U.S. Dollar (USD), which has corrected from multi-week highs reached last week, further bolstering the appeal of non-yielding gold. While the fundamental backdrop supports further gains, some caution is warranted due to the overbought conditions observed on the daily chart.
U.S. Tariff Woes Continue to Impact Markets
The latest market turbulence stems from President Trump’s announcement last week of a 25% levy on all non-American cars and light trucks. This move is set to precede the implementation of reciprocal tariffs on April 2. On Sunday, the Wall Street Journal reported that the Trump administration is considering expanding tariffs to target a broader range of countries, pushing gold to a fresh record high during the Asian session on Monday.
In addition to trade concerns, President Trump’s inflammatory remarks about Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy have further intensified market jitters. Trump’s threats to impose massive tariffs on Russian oil and potential military actions in Iran have contributed to a global flight to safety, pushing investors toward gold.
U.S. Economic Data and Inflation Concerns Support Gold
Recent U.S. economic data has also reinforced gold’s safe-haven appeal. February’s Personal Consumption Expenditures (PCE) Price Index rose by 0.3% month-over-month and 2.5% year-over-year, aligning with market expectations. More concerning for the Fed, however, was the core PCE index, which, excluding volatile food and energy prices, increased by 0.4% — the largest monthly gain since January 2024. This pushed the 12-month inflation rate to 2.8%, adding to concerns that inflationary pressures are not subsiding.
Moreover, a University of Michigan survey revealed that consumer expectations for inflation over the next 12 months surged to their highest level in nearly two and a half years. This further strengthens the case for gold as a hedge against rising prices, particularly amidst growing concerns about slowing U.S. economic growth and fears of stagflation. These factors have weighed on the U.S. Dollar, which has fallen for the third consecutive day, further supporting gold’s rally.
Global Economic Data and Market Outlook
On the global front, China’s official Purchasing Managers’ Index (PMI) showed modest improvement, with the Manufacturing PMI edging up to 50.5 and the Non-Manufacturing PMI rising to 50.8 in March. However, these figures had little impact on gold prices, which remain buoyed by broader economic uncertainties.
Looking ahead, traders are focused on key U.S. macroeconomic releases, including the Nonfarm Payrolls (NFP) report set for Friday. However, the overbought conditions in the gold market, indicated by the Relative Strength Index (RSI) above 70 for three consecutive days, suggest that a consolidation phase may be necessary before gold can extend its recent rally.
Technical Analysis: Consolidation Expected Before Further Gains
From a technical standpoint, Friday’s breakout above the previous all-time high of $3,057–$3,058 was a significant bullish signal. However, with the RSI indicating overbought conditions, traders may be cautious about entering new positions without a period of consolidation or a modest pullback.
Any corrective move below the Asian session low of $3,076 could find support around the $3,035–$3,036 zone. Should gold drop below this level, a deeper slide toward the psychological $3,000 mark could be in the cards. A decisive break of this level could shift the near-term bias in favor of bearish traders, paving the way for further losses.
In summary, while the outlook for gold remains generally positive amid ongoing economic and geopolitical uncertainty, the market’s overbought condition suggests that a temporary pause or pullback may be in the near future.
Conclusion
In conclusion, gold prices have reached new record highs as uncertainty surrounding U.S. tariffs, economic slowdown concerns, and geopolitical tensions continue to drive demand for the safe-haven asset. Despite the strong bullish momentum, overbought conditions on the daily chart suggest a period of consolidation may be needed before further gains can be made. As traders await critical U.S. economic data, including the Nonfarm Payrolls report later this week, the outlook for gold remains positive, but caution is warranted for those looking to enter new positions. The fundamental backdrop of inflation concerns, slowing economic growth, and a weakened U.S. Dollar supports the view that gold could continue to see upward momentum, although short-term corrections may provide opportunities for traders to position for the next phase of the rally.