Gold prices (XAU/USD) saw renewed dip-buying during the Asian session on Monday, though they remained within a familiar trading range near last week’s all-time high. Persistent uncertainty surrounding former U.S. President Donald Trump’s trade tariffs and their economic impact, coupled with broader risk aversion, continued to bolster the appeal of the safe-haven metal. Additionally, geopolitical tensions and weakness in the U.S. dollar further supported gold’s stability.
However, expectations that the Federal Reserve (Fed) will maintain higher interest rates for an extended period due to persistent inflation have limited gold’s upside. Investors are now turning their attention to the release of the U.S. Personal Consumption Expenditures (PCE) Price Index—considered the Fed’s preferred inflation gauge—on Friday. The data is expected to provide crucial insight into the Fed’s rate-cut trajectory, influencing the U.S. dollar’s direction and gold’s next major move.
Gold Prices Buoyed by Trade War Concerns
Fears over potential economic fallout from Trump’s tariff policies helped gold register its eighth consecutive weekly gain, hitting a fresh record high last week. Since taking office, Trump has imposed a 25% tariff on steel and aluminum, along with an additional 10% levy on Chinese imports. Last week, he signaled plans to announce new tariffs within a month.
Economic data released on Friday raised further concerns about U.S. growth, weighing on the dollar and driving demand for gold. The flash S&P Global U.S. Composite PMI fell to 50.4 in February from 52.7 in January, indicating a slowdown in private sector activity amid uncertainty over Trump’s trade measures.
Additionally, consumer sentiment weakened, with the University of Michigan’s Consumer Sentiment Index dropping to a 15-month low of 64.7 in February, down from 71.7 in the previous month. Inflation expectations among households also surged to 4.3%, the highest level since November 2023, reinforcing gold’s appeal as a hedge against rising prices.
Despite gold’s recent rally, stronger U.S. consumer inflation data and hawkish signals from the Federal Open Market Committee (FOMC) minutes suggest the Fed will keep interest rates elevated, creating headwinds for the non-yielding metal. This week’s U.S. economic docket includes the preliminary Q4 GDP report and Durable Goods Orders on Thursday, along with speeches from key Fed officials, all of which could influence dollar movements and gold’s price action.
Technical Outlook: Overbought Conditions Signal Caution
From a technical standpoint, the daily Relative Strength Index (RSI) remains above 70, indicating overbought conditions that could discourage aggressive bullish positions. However, a decisive move above the $2,950–$2,955 resistance zone could trigger fresh buying momentum, extending gold’s uptrend seen over the past two months.
Conversely, any pullback is expected to attract buying interest near the $2,920–$2,915 region, followed by additional support at $2,900. A break below $2,880 could expose gold to further declines toward the $2,860–$2,855 range, with deeper support levels at $2,834 and the key psychological mark of $2,800.
As market participants await key economic data, gold’s trajectory remains highly dependent on U.S. inflation readings and Fed policy signals in the coming days.
