Gold prices (XAU/USD) continued their upward trajectory on Friday, marking the second consecutive day of gains and reaching a fresh all-time peak in the $3,077-$3,078 range during the Asian session. The surge is driven by persistent uncertainty surrounding US President Donald Trump’s trade policies and their potential impact on the global economy. This has contributed to a generally weaker sentiment in equity markets, prompting investors to seek the safe haven of gold.
The ongoing fears that Trump’s aggressive trade policies could significantly slow global economic growth have raised expectations that the Federal Reserve (Fed) may soon resume its rate-cutting cycle. This has weighed on the US dollar, with the greenback failing to attract meaningful buyers, further supporting gold, a non-yielding asset.
However, slightly overbought conditions are preventing XAU/USD bulls from placing fresh bets ahead of the highly anticipated release of the US Personal Consumption Expenditure (PCE) Price Index, which is expected to provide further insights into the Fed’s policy outlook.
Trade Tensions and Economic Data Fuel Gold’s Record High
President Trump’s announcement of a 25% tariff on imported cars and light trucks, effective April 3, has exacerbated global trade tensions and diminished investor appetite for riskier assets. This move builds on existing tariffs on steel and aluminum, with additional reciprocal tariffs expected next week, adding to global uncertainty and pushing gold to its new record high.
Markets are now pricing in the possibility of further rate cuts from the Federal Reserve, with the next policy meeting in June coming into focus as concerns over a tariff-induced slowdown in the US economy grow.
Despite stronger-than-expected US economic data released on Thursday, including a 2.4% annualized GDP growth for Q4 2024 and a drop in new unemployment claims, the US dollar remains under pressure. This has allowed gold to maintain its upward momentum.
Richmond Fed President Tom Barkin stated that the current “moderately restrictive” monetary policy is suitable given the uncertain environment and rapid changes in US government policy. Meanwhile, Boston Fed President Susan Collins warned that Trump’s trade policies could increase US inflation, though the duration of that pressure remains uncertain.
With inflationary concerns lingering, all eyes are on the upcoming PCE Price Index release, the Fed’s preferred inflation gauge, to determine the likelihood of further rate cuts, which would impact the USD and offer additional support to gold.
Gold Technical Outlook: Bullish Bias Amid Overbought Conditions
From a technical perspective, the price action this week suggests a continued bullish trend, with gold maintaining strong support near the psychological $3,000 mark before pushing higher. However, the Relative Strength Index (RSI) is showing overbought conditions on the daily chart, signaling the need for caution. A period of consolidation or a modest pullback could provide an opportunity for traders to position for further gains.
In the event of a correction, key support levels are found near the $3,050-$3,048 zone, which is expected to attract dip-buyers. A move below this zone could see gold retesting support near $3,036-$3,035. A sustained break below this level could trigger further selling, potentially dragging gold prices back toward the $3,020-$3,019 area, with $3,000 serving as a critical support point for short-term traders. If $3,000 is broken decisively, a more substantial decline could follow.
