Gold prices (XAU/USD) found some support around the $2,972-$2,971 range, marking a near four-week low reached earlier this Monday. The price movement appears to have paused its retracement from last week’s all-time high. A broader decline across global financial markets, driven by U.S. President Donald Trump’s recent tariff announcements, has bolstered demand for the safe-haven asset. Additionally, data released today reveals that the People’s Bank of China (PBOC) added gold to its reserves for the fifth consecutive month, providing further momentum for the precious metal.
The ongoing risk-off sentiment, coupled with expectations that the U.S. economy could slow due to tariff impacts, has led to a decline in U.S. Treasury bond yields. This development has hindered the U.S. dollar’s attempt to extend its gains following last Friday’s bounce from a multi-month low. With geopolitical risks continuing to simmer, these factors have made gold a favorable asset. However, traders are still liquidating their long positions to cover losses in other markets, which has limited the upside potential for gold.
Global Trade Tensions Fuel Economic Concerns and Gold Support
The widening global trade conflict has escalated concerns over a potential economic recession, prompting further sell-offs in global equity markets. As a result, traders have been cutting back on their long positions in gold and raising cash to mitigate losses in other sectors.
According to data published on Monday, the PBOC increased its gold reserves in March, adding 0.09 million troy ounces. This marks the fifth consecutive month of gold purchases by China amid the ongoing global trade and geopolitical instability.
President Trump’s decision last Wednesday to impose reciprocal tariffs of at least 10% on all imported goods, with China facing tariffs as high as 54%, has intensified trade tensions. In response, China’s Ministry of Commerce announced on Friday that it would implement additional tariffs of 34% on all U.S. imports.
U.S. Commerce Secretary Howard Lutnick confirmed on Sunday that the tariffs would not be delayed, and the policy would remain in effect for the coming weeks. Trump further emphasized that there would be no agreement with China unless the trade deficit was addressed.
Despite a stronger-than-expected U.S. jobs report last Friday—showing a gain of 228,000 jobs in March, up from 117,000 in February—the U.S. dollar has struggled to capitalize on its recent modest recovery. Federal Reserve Chairman Jerome Powell acknowledged that inflation is nearing the target but still remains slightly elevated. Powell also warned that Trump’s tariffs could exert significant inflationary pressure, noting that the Fed’s mandate is to prevent temporary price hikes from becoming persistent inflation.
Fed Rate-Cut Expectations Weigh on the U.S. Dollar, Benefiting Gold
Investors are still factoring in the likelihood that the Federal Reserve will resume its rate-cutting cycle in June, with expectations for at least four rate cuts this year. This anticipation, coupled with the ongoing flight to safety, has kept the yield on the benchmark 10-year U.S. government bond below 4.0%, which has further weakened the U.S. dollar and provided support for gold.
As a result, gold prices staged a modest rebound from their nearly four-week low earlier in the day. However, the lack of follow-through suggests that traders remain cautious, particularly as the precious metal navigates through a volatile market environment.
Technical Analysis: Gold Faces Key Resistance Levels
From a technical standpoint, the sharp retracement in gold prices last week has paused near the 61.8% Fibonacci retracement level of the February-April price movement. The subsequent recovery stalled near the $3,055 mark, which has now turned from support to resistance. This level is pivotal for gold’s short-term outlook; a breakthrough could see prices climb toward the $3,080 region and potentially to $3,100.
On the downside, the $3,000 level, which coincides with the 50% retracement, is likely to act as immediate support. Below that, the $2,972-$2,971 area—where the multi-week low was recorded earlier this week—remains a key threshold. Further declines below this level could see gold test the 50-day Simple Moving Average (SMA) around $2,946. A decisive break below this mark could shift market sentiment toward bearish territory, setting the stage for additional downside pressure.
As gold faces a challenging environment of economic uncertainty, shifting risk sentiment, and technical resistance, traders will closely monitor these key levels for signs of direction.