Gold (XAU/USD) remains resilient in early European trading on Tuesday, holding steady around $3,230, close to the all-time high reached the previous day. Ongoing concerns over the escalating US-China trade war continue to provide support for the precious metal, with investors seeking safe-haven assets amid fears of economic repercussions.
In addition, expectations that US economic slowdown driven by tariffs may prompt the Federal Reserve to cut interest rates more aggressively in 2025 are further benefiting gold. Meanwhile, while optimism surrounding US President Trump’s temporary tariff reprieve has prevented further upward momentum, it has failed to cap gold’s bullish tone entirely.
Market Movers: Tariff Uncertainty and Fed Rate Cut Bets Boost Gold
Concerns over the impact of President Trump’s aggressive trade policies continue to fuel demand for safe-haven assets like gold. Recently, China responded to the US tariffs by increasing duties on US imports to 125%, exacerbating tensions and keeping gold prices near the record levels seen earlier this week. These developments have sparked renewed concerns about the potential consequences for the US economy, particularly with trade disruptions affecting critical imports.
With the US facing rising recession fears and market expectations for multiple rate cuts by the Federal Reserve in 2025, the US Dollar has struggled to recover. Fed officials, including Governor Christopher Waller, have warned that the tariff policies could severely damage the economy, compelling the central bank to intervene with rate cuts. Atlanta Fed President Raphael Bostic also noted that tariffs could exert upward pressure on inflation, further complicating the Fed’s policy options.
Despite these challenges, the global risk sentiment improved after the White House temporarily exempted electronics like smartphones and computers from Trump’s tariffs. Additionally, Trump hinted at possible tariff exemptions for the auto industry, further easing some of the market’s immediate concerns. However, his announcement of potential tariffs on semiconductors and pharmaceuticals continues to stoke uncertainty, maintaining support for gold.
Looking Ahead: US Data and Fed Chair Powell’s Speech in Focus
Traders are now turning their attention to the US economic data, with the Empire State Manufacturing Index release set to potentially impact the US Dollar and influence gold’s next move. However, the key event remains Fed Chair Jerome Powell’s speech on Wednesday, which could provide further clues about the Fed’s rate-cut strategy and impact gold prices.
Gold’s Technical Outlook: Consolidation Expected Before Further Gains
From a technical standpoint, gold’s recent bullish trend remains intact. After testing the $3,200 level, gold has continued its upward movement, suggesting that the uptrend is far from over. However, the daily Relative Strength Index (RSI) is approaching overbought levels, indicating the possibility of short-term consolidation or a pullback before further gains.
Resistance is expected around the $3,245-3,246 region, which marks the record high reached earlier in the week. On the downside, should gold weaken below the $3,200 mark, the $3,168-3,167 area could serve as a strong support level. A decisive break below this support might trigger a deeper corrective move, potentially targeting the $3,136 support level, followed by $3,115 and $3,100.
Conclusion
Gold’s ability to hold above $3,200, coupled with the ongoing US-China trade tensions and expectations of Fed rate cuts, suggests that the precious metal remains poised for further gains. While some short-term consolidation may be expected, gold is likely to continue benefiting from the broader market uncertainty, with the potential to retest its all-time peak in the near future.