Gold prices (XAU/USD) continued their upward momentum on Thursday, building on the previous day’s gains and marking a second consecutive day of positive movement. This rally is fueled by ongoing concerns over escalating US-China trade tensions, even as US President Donald Trump announced a 90-day delay on tariffs for most nations. The decision, however, did not alleviate broader market anxieties about a potential trade war between the world’s two largest economies, which is driving safe-haven demand for gold.
Despite optimism stemming from Trump’s tariff pause, fears persist that trade conflicts could stoke inflation and disrupt global economic growth. These concerns, combined with rising inflation expectations, have further bolstered gold’s appeal as a hedge against rising prices.
Meanwhile, the US Dollar (USD) has struggled to maintain its recent bounce, as traders factor in the likelihood of multiple interest rate cuts by the Federal Reserve (Fed) throughout 2025. This has supported gold, which is a non-yielding asset, offering no interest payments. A favorable shift in global risk sentiment could, however, deter traders from adding to bullish positions in the precious metal. Additionally, higher US Treasury bond yields could cap gold’s gains, with investors keenly awaiting the release of US consumer inflation data later today.
Market Overview: US-China Trade Tensions Fuel Gold’s Rise
In a dramatic turn of events, just one day after new tariffs were implemented, President Trump announced a pause on tariffs for most nations for 90 days. However, he escalated tensions with China by increasing the tax rate on Chinese goods to 125%, following China’s decision to impose a 50% tariff on US imports. This intensifying trade dispute has sparked fears of higher inflation and hindered economic growth, prompting investors to seek the safety of gold.
On Wednesday, these factors contributed to a more than 2% surge in gold prices, marking the metal’s best performance since October 2023. This momentum has remained strong despite a significant recovery in global equities.
Following the March FOMC meeting minutes, traders revised their expectations for future Fed rate cuts, reflecting concerns about rising inflation. Several Federal Reserve officials expressed caution, warning that tariffs could drive up inflation, which would limit the scope for aggressive rate cuts. Notably, Minneapolis Fed President Neel Kashkari stated that the bar for further rate cuts remains high, while Cleveland Fed President Beth Hammack cautioned against premature rate cuts in the face of modestly restrictive monetary policy.
Richmond Fed President Tom Barkin and St. Louis Fed President Alberto Musalem also voiced concerns that tariff-driven price hikes could persist, adding to market uncertainty. As a result, traders have now priced in a smaller rate-cutting cycle, expecting a total of 75 basis points in cuts over the course of 2025, with the first likely occurring in June.
The anticipation surrounding upcoming US inflation data and the Producer Price Index (PPI) release on Friday remains high, with these figures set to influence expectations for the Fed’s next moves and provide direction for the USD and gold prices.
Technical Outlook: Gold Eyes All-Time Highs
From a technical standpoint, gold has shown resilience, holding above key support levels earlier this week. Positive signals from oscillators on the daily chart suggest that gold could continue its ascent, with the potential to revisit the all-time high of around $3,167-$3,168, reached earlier this month.
However, if gold falls below the $3,100 level, key support is seen near the $3,060-$3,065 zone. A decisive break below this area could shift the market sentiment toward the bearish side, with $3,000 acting as the next psychological support level. The 200-period SMA on the 4-hour chart will also be a critical level to monitor in the near term.
As the market digests the ongoing trade developments and inflation data, gold’s trajectory remains tightly linked to broader economic uncertainties and Fed policy expectations.
