Gold prices (XAU/USD) slightly retreated from the $3,500 level on Tuesday, a fresh all-time high touched during the Asian session. This pullback comes as bulls pause, navigating overbought conditions on short-term charts. Despite the slight decline, any significant correction remains unlikely due to persistent concerns about US President Donald Trump’s aggressive tariffs and the potential economic fallout from the ongoing trade war. These factors, along with heightened geopolitical tensions, continue to support the safe-haven appeal of gold.
Trump’s shifting trade policy announcements have undermined investor confidence in the US economy, while his recent criticism of Federal Reserve Chairman Jerome Powell has raised doubts about the Fed’s independence. Trump’s accusations that Powell is not acting quickly enough to reduce interest rates, combined with reports suggesting his team is exploring the possibility of removing Powell, further weigh on the US Dollar (USD). The growing expectation of more aggressive rate cuts by the Fed adds to the pressure on the dollar, strengthening the demand for non-yielding gold.
The uncertainty surrounding Trump’s tariffs, especially in relation to the global economic slowdown, continues to push gold to new record highs. Meanwhile, market participants remain cautious as Trump’s erratic stance on trade policies and his call to dismiss Powell leave investors on edge, further benefiting gold.
The CME Group’s FedWatch Tool indicates traders are betting on a 25-basis-point interest rate cut by June, with at least three rate reductions expected in 2025. These expectations are weakening the USD, which failed to recover from a three-year low touched earlier this week.
On the geopolitical front, Russian forces launched 96 drones and three missiles into eastern and southern Ukraine, following a brief Easter ceasefire. As traders await the release of the Richmond Manufacturing Index and speeches from key Federal Open Market Committee (FOMC) members, attention will remain focused on Wednesday’s flash Purchasing Managers’ Index (PMI) data, which could provide further insight into global economic conditions and influence the XAU/USD pair.
From a technical standpoint, gold’s relative strength index (RSI) remains above the 70 mark, signaling caution for bullish traders. A consolidation or modest pullback may be prudent before entering new bullish positions. Support for gold is expected around the $3,425-$3,423 zone, with further support at $3,400. A break below this level could lead to technical selling and a deeper correction toward $3,358-$3,357, followed by $3,344.
