Gold prices (XAU/USD) maintained a positive bias through Thursday’s Asian session, hovering around $2,944 per troy ounce, just below the all-time high reached the previous day. Growing concerns over US President Donald Trump’s proposed tariffs on imports have heightened fears of a global trade war, driving investors toward the safe-haven metal. As tensions escalate, demand for gold surged, bolstered by a fresh decline in US Treasury bond yields, further benefiting the non-yielding precious metal.
Despite the drop in bond yields, the US Dollar (USD) has struggled to capitalize on this week’s modest recovery from a two-month low. This, in turn, provided additional support for USD-denominated assets like gold. Market participants are also factoring in the Federal Reserve’s stance on interest rates, with expectations for an extended pause reinforced by the hawkish minutes from the Federal Open Market Committee (FOMC) meeting released on Wednesday. However, some caution is warranted due to the slightly overbought conditions on gold’s daily chart.
Global Trade Tensions Drive Gold Demand
President Trump’s announcement on Wednesday that he plans to impose heavy tariffs on various products next month, or sooner, has escalated fears of further trade tensions, which are continuing to prop up gold prices as a safe-haven asset. US Commerce Secretary Howard Lutnick, in a Fox News interview, suggested that Trump’s broader economic goals may include overhauling the Internal Revenue Service, adding another layer of uncertainty to market sentiment. While Trump mentioned a potential new trade deal with China, the prevailing uncertainty has supported gold’s bullish momentum.
Meanwhile, the US Dollar has failed to capitalize on its modest gains from the past two days. A fresh dip in US Treasury yields has added further pressure, reinforcing gold’s appeal. The FOMC minutes revealed that while the US economy has shown resilience, officials remain cautious, highlighting a high degree of uncertainty in deciding future rate cuts. Fed Vice Chairman Philip Jefferson noted that inflation remains elevated, and the path back to the 2% target may be challenging. Chicago Fed President Austan Goolsbee also indicated that while inflation has dropped, it remains too high for a rate reduction to occur soon.
Technical Indicators and Market Outlook
Gold’s technical picture shows signs of strength, with the Relative Strength Index (RSI) on the daily chart holding above the 70 mark, suggesting the market may be nearing overbought territory. This could limit further immediate upside potential, indicating that a consolidation phase could be ahead. However, the near-term bias remains bullish, with gold potentially pushing above the $2,945-$2,950 range. A sustained breakout above this level could mark the continuation of an uptrend that has been in place for the past two months.
On the downside, any pullback below the immediate support at $2,928 could present a buying opportunity, with further support seen near $2,918 and $2,900. A more substantial corrective move below $2,880 could open the door to further downside, potentially targeting the $2,860-$2,855 range, and possibly extending towards the $2,815 mark.
With key US economic data, including Weekly Jobless Claims and the Philly Fed Manufacturing Index, scheduled for release later Thursday, and flash global PMIs on Friday, the gold market will likely continue to react to evolving macroeconomic conditions and geopolitical risks in the coming days.
