Gold prices (XAU/USD) struggled to sustain modest gains during Monday’s Asian session, remaining above the three-week low hit on Friday. Despite market expectations that the Federal Reserve (Fed) will implement two quarter-point rate cuts by year-end, the US Dollar (USD) failed to build on last week’s rebound from a two-month low. This, in turn, supported demand for the non-yielding yellow metal.
Additionally, concerns over the economic impact of US President Donald Trump’s tariff plans and ongoing geopolitical risks bolstered gold’s safe-haven appeal. However, the lack of strong buying momentum suggests caution among investors before confirming that gold’s recent pullback from its all-time high has ended. This hesitation comes ahead of a series of key US economic data releases this week.
Gold Lacks Bullish Momentum Despite Supportive Factors
On Friday, the US Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index rose 0.3% in January and 2.5% over the past year, slightly down from December’s 2.6%. Meanwhile, core PCE inflation—which excludes food and energy—climbed 2.6% year-over-year, easing from the previous 2.9%.
Adding to economic concerns, US consumer spending unexpectedly fell by 0.2% in January, marking its first decline since March 2023 and the steepest drop in nearly four years. This downturn raised worries about the US growth outlook. Market participants, as reflected in the CME Group’s FedWatch Tool, now anticipate the Fed could begin cutting rates at its June meeting, with another reduction likely in September.
At the same time, Trump’s announcement of new tariffs on Canada and Mexico, set to take effect Tuesday, along with plans to double the 10% universal tariff on Chinese imports, heightened fears of a global trade war. This uncertainty further reinforced gold’s safe-haven demand.
Market attention now shifts to the US ISM Manufacturing PMI data, due later Monday, and Friday’s crucial Nonfarm Payrolls report, both of which could shape the near-term trajectory of the USD and gold prices.
Gold Faces Resistance at $2,885, Risk of Further Declines
From a technical standpoint, last week’s break below the 23.6% Fibonacci retracement level of the December-February rally signaled increased selling pressure. Momentum indicators on the daily chart are gaining bearish traction, raising the likelihood of an extended pullback from gold’s all-time high.
Upside moves may encounter resistance near the $2,885 level, followed by the psychological $2,900 mark. A breakout above these levels could push prices toward the $2,934 resistance, with the potential to retest the record high of $2,956.
Conversely, Friday’s low of $2,832-$2,833 now serves as immediate support. A break below this level could lead to a decline toward the 38.2% Fibonacci retracement zone at $2,810-$2,815. A further drop below the $2,800 threshold may confirm a near-term peak, setting the stage for deeper losses.
As market participants weigh Fed policy expectations and trade risks, gold’s near-term direction will hinge on upcoming US economic data and broader risk sentiment.
