The price of gold (XAU/USD) has entered a phase of bullish consolidation after reaching a fresh all-time high during Thursday’s Asian trading session. However, further upward movement is tempered by overbought market conditions and a positive risk sentiment, which typically diminishes demand for the safe-haven asset. Despite this, a significant price correction remains unlikely, given ongoing concerns over U.S. trade policies under President Donald Trump and their impact on global markets.
Geopolitical risks and expectations of a dovish stance from the Federal Reserve continue to support gold’s appeal. Meanwhile, the U.S. dollar is struggling to gain traction, hovering near its lowest level since October, as investors anticipate the Fed will soon resume interest rate cuts. This weak dollar environment is expected to limit gold’s downside potential and prevent a near-term peak in its price.
Market Drivers: Trade Tensions, Geopolitical Risks, and Fed Outlook
Asian equity markets mirrored overnight gains on Wall Street, following the Fed’s decision to hold interest rates steady and maintain its outlook for two 25-basis-point cuts by year-end. This decision aligns with investor expectations, reinforcing confidence in the market.
Additionally, diplomatic developments have contributed to market optimism. On Tuesday, President Trump and Russian President Vladimir Putin agreed to pause strikes on energy infrastructure in the ongoing Ukraine conflict. Trump also discussed ending the prolonged war with Ukrainian President Volodymyr Zelenskiy, further boosting investor sentiment.
However, uncertainties persist regarding Trump’s aggressive trade policies. Since February, the U.S. has imposed a 25% tariff on steel and aluminum and threatened additional sectoral tariffs, raising fears of a global trade war. The Fed has subsequently lowered its economic growth forecast for the year, reflecting concerns about the impact of these policies.
Investors now assign a 65% probability that the Fed will resume rate cuts in June. This outlook has weighed on the U.S. dollar, keeping it near multi-month lows, and continues to provide support for gold prices, particularly amid heightened tensions in the Middle East.
Israel recently launched a limited ground incursion into Gaza following an aerial bombardment that ended a two-month ceasefire with Hamas. Prime Minister Benjamin Netanyahu has signaled a possible expansion of military operations, sustaining demand for safe-haven assets such as gold.
Looking ahead, traders will focus on upcoming monetary policy updates from the Bank of England and the Swiss National Bank. Additionally, key U.S. economic data—including weekly jobless claims, the Philly Fed Manufacturing Index, and existing home sales—could influence short-term price movements for gold.
Technical Outlook: Gold Awaits Consolidation Before Further Gains
Gold’s daily Relative Strength Index (RSI) remains above 70, signaling overbought conditions and prompting caution among investors. A period of consolidation or a slight pullback may be necessary before the next upward move in the ongoing three-month rally.
The recent breakthrough of the $3,000 psychological barrier suggests that the primary trend remains bullish. Any downward correction is expected to attract buying interest around the $3,023-$3,022 range, with $3,000 serving as a key support level. A break below this threshold could trigger technical selling, potentially pushing gold toward intermediate support at $2,980-$2,978 and further to the $2,956 level. In a more extended decline, gold could test the $2,930 support area before reaching $2,900 or last week’s swing low near $2,880.
Overall, the outlook for gold remains bullish, with key support levels likely to limit downside risks, while global uncertainty and a dovish Fed stance provide continued upside momentum.
