Gold prices (XAU/USD) maintained their bullish momentum through the first half of the European session on Monday, hovering near an all-time high above $3,120. Investors continue to seek refuge in the precious metal as uncertainty over U.S. President Donald Trump’s proposed reciprocal tariffs, coupled with rising fears of a U.S. recession and geopolitical risks, dampens market sentiment. The risk-averse mood is evident in the broader weakness across equity markets, fueling gold’s rally for the third consecutive session.
Market Dynamics: Tariff Uncertainty and Safe-Haven Demand
Trump’s recent decision to impose a 25% tariff on all non-American cars and light trucks ahead of the scheduled reciprocal tariffs on April 2 has rattled markets. The Wall Street Journal reported on Sunday that the administration is considering broader trade tariffs, intensifying concerns and pushing gold to fresh highs in the Asian session.
Adding to geopolitical tensions, Trump expressed strong discontent with Russian President Vladimir Putin and threatened significant tariffs on Russian oil. He also warned of potential military action in Iran. Meanwhile, his criticism of Ukrainian President Volodymyr Zelenskiy over a critical rare earth minerals deal further spooked investors, prompting a flight to safe-haven assets.
Economic Data and Inflation Concerns
Friday’s U.S. data release showed that the Personal Consumption Expenditures (PCE) Price Index rose 0.3% in February and 2.5% year-over-year, aligning with expectations. However, the core PCE—excluding food and energy—jumped 0.4%, marking its highest monthly increase since January 2024 and lifting the annual inflation rate to 2.8%.
Consumer spending accelerated 0.4% in February after a downwardly revised 0.3% decline in January, while personal income surged 0.8%. A separate University of Michigan survey revealed that consumer inflation expectations hit a two-and-a-half-year high in March, reinforcing gold’s appeal as a hedge against rising prices.
Despite positive economic data from China, where the official Manufacturing PMI edged up to 50.5 and the Non-Manufacturing PMI rose to 50.8, gold showed little reaction, as global market sentiment remained focused on U.S. economic concerns and trade risks.
Technical Outlook: Overbought Conditions Signal Caution
Gold’s sustained breakout above the previous all-time high of $3,057-$3,058 on Friday reinforced the bullish trend. However, the Relative Strength Index (RSI) remains above 70 for the third consecutive day, indicating overbought conditions that could prompt a short-term consolidation or modest pullback.
In case of a downside correction, support is expected around $3,076, followed by a key zone at $3,036-$3,035. A break below $3,000 could shift the near-term bias toward bearish traders, potentially triggering deeper losses.
Looking ahead, market participants will focus on upcoming U.S. macroeconomic releases, including Friday’s Nonfarm Payrolls (NFP) report, which could influence Federal Reserve policy expectations and gold’s trajectory. While overbought technical indicators suggest caution, the broader fundamentals continue to favor an upward bias for the precious metal.
