Gold (XAU/USD) continues to trade with a positive bias during the first half of Wednesday’s European session, holding close to its all-time high set earlier this week. Investors remain focused on U.S. President Donald Trump’s trade policies and their potential economic repercussions, with persistent geopolitical tensions further bolstering demand for the safe-haven asset. Additionally, expectations that the Federal Reserve may resume its rate-cutting cycle soon in response to a tariff-driven U.S. economic slowdown are adding support to gold’s upward movement.
Market Drivers: Trade Fears and Fed Policy Expectations
The ongoing concerns about the economic fallout from Trump’s aggressive trade measures are helping to sustain gold’s upward momentum, following a slight pullback from a record high. Recent U.S. macroeconomic data has raised concerns about sticky inflation and slowing economic growth, with some analysts suggesting the U.S. economy could be heading toward stagflation. This has increased expectations that the Federal Reserve will resume rate cuts as early as June.
Disappointing U.S. data, such as the ISM Manufacturing Purchasing Managers Index (PMI) for March, which fell to 49 from 50.3 in February, has fueled concerns about an economic slowdown. The PMI showed that business activity contracted for the first time in three months. Additionally, inflation at the factory gate surged to its highest level in nearly three years, while the Employment Index pointed to a decline in manufacturing sector jobs.
The Job Openings and Labor Turnover Survey (JOLTS) also revealed a drop in job openings, with the number of positions available on the last business day of February falling to 7.56 million from 7.76 million in January. As a result, market expectations, as reflected in the CME Group’s FedWatch Tool, now price in the possibility of an 80-basis-point rate cut from the Fed this year, undermining the U.S. Dollar and boosting demand for gold, which offers no yield.
Safe-Haven Demand Supports Gold Price
Asian equity markets tracked Wall Street’s gains, and while this might be holding back gold bulls from making aggressive moves ahead of Trump’s upcoming announcement on reciprocal tariffs, the broader risk sentiment continues to favor safe-haven assets like gold. Traders are also awaiting the release of key U.S. economic reports, including the ADP employment data and Factory Orders, which could influence the U.S. Dollar and provide further direction for gold.
Technical Analysis: Bullish Sentiment Remains Intact
Technically, the pullback from gold’s recent all-time peak near $3,149 stalled at the $3,100 level, with the subsequent rebound reinforcing bullish sentiment. However, the daily Relative Strength Index (RSI) is now well above the 70 mark, indicating overbought conditions. As a result, some consolidation or a modest pullback might be necessary before further gains can be anticipated. Despite this, the overall technical setup suggests that the path of least resistance for gold remains upward.
The $3,100 level is likely to continue providing immediate support, acting as a key pivot point for the gold price. A significant break below this level could trigger a round of profit-taking, pushing gold toward the $3,076 area, which represents the weekly swing low from Monday. Further downside could extend to the $3,057-$3,058 resistance zone, with support near the $3,036-$3,035 range, and the $3,000 psychological level potentially acting as a strong base.
Outlook
In summary, the outlook for gold remains positive, driven by concerns over global trade tensions, the potential for a U.S. economic slowdown, and expectations of a dovish Federal Reserve. While gold may face some near-term consolidation, the overall trend suggests that the yellow metal has the potential for further upside in the coming sessions. Investors will be closely watching developments in the global trade landscape and U.S. economic data for fresh catalysts that could influence gold’s next move.