Gold prices (XAU/USD) continued to climb during the Asian trading hours on Friday, driven by mounting concerns over US President Donald Trump’s proposed tariffs and a decline in US bond yields. These factors are providing support for the precious metal. However, expectations of a prolonged hawkish stance from the US Federal Reserve may limit gold’s upside potential.
Trump’s tariff strategy, unveiled Thursday, outlines plans to impose reciprocal tariffs on countries that levy duties on US imports. Although the policy is not expected to take effect until April 1, it has heightened concerns about a potential global trade war, supporting demand for safe-haven assets like gold.
In addition, the US Producer Price Index (PPI) showed a 3.5% year-on-year increase in January, surpassing market expectations of 3.2%. The core PPI, which excludes food and energy, also rose by 3.6%, slightly beating the prior month’s 3.5% reading. Meanwhile, US Initial Jobless Claims for the week ending February 8 decreased to 213,000, below the anticipated 215,000, suggesting a tight labor market.
Despite these bullish signals for gold, market participants are closely monitoring the US Federal Reserve’s policy stance. The central bank’s commitment to keeping interest rates elevated for an extended period could weigh on non-yielding assets like gold, limiting further gains.
Technical Outlook: Gold remains in a strong uptrend, trading above the key 100-day Exponential Moving Average (EMA). However, the Relative Strength Index (RSI) is in overbought territory, exceeding 70.0, indicating that caution is warranted before further positioning for gains.
The immediate resistance for gold is at the $2,942-$2,943 range, marking its all-time high reached earlier this week. A breakout above this level could push prices toward $2,955, the upper boundary of the Bollinger Band, with the potential to reach the psychological $3,000 level. On the downside, initial support is seen at $2,864, with further downside potential toward $2,744 and a critical support region around $2,680-$2,685, where the 100-day EMA and lower Bollinger Band converge.
Traders will be watching the release of January’s US Retail Sales later on Friday for further market direction.
