Gold (XAU/USD) maintained its positive momentum, trading comfortably above the $3,200 mark during the Asian session on Tuesday, remaining close to the all-time high reached the previous day. The precious metal continues to benefit from growing concerns over the escalating US-China trade conflict and its potential impact on the global economy, which has bolstered demand for safe-haven assets. Additionally, increasing expectations for more aggressive policy easing by the Federal Reserve (Fed) and a weakening US Dollar have further supported gold’s bullish trend.
US President Donald Trump’s temporary tariff reprieve on key consumer electronics, along with signals that he may exempt the automotive sector from the 25% tariffs, have provided some relief to market sentiment, preventing traders from placing fresh bullish bets on gold. However, the broader economic backdrop suggests that the path of least resistance for gold remains to the upside. As such, any corrective pullbacks in price are likely to be seen as buying opportunities, with potential for limited downside.
US-China Trade Concerns and Fed Policy Weigh on Dollar, Bolster Gold
Ongoing concerns about the economic fallout from President Trump’s aggressive trade policies have provided continued support for gold. On Friday, China raised tariffs on US imports to 125% in retaliation to Trump’s decision to impose duties as high as 145% on Chinese goods. This escalation has contributed to gold’s resilience near its all-time high, touched on Monday.
The trade tensions have raised doubts about the US economy’s strength, particularly as the US relies on hard-to-replace materials from China. This uncertainty, coupled with growing concerns about a potential US recession, has weakened confidence in the US Dollar. Furthermore, expectations that the Fed may soon resume its rate-cutting cycle, possibly lowering borrowing costs three times in 2025, have further pressured the dollar.
Fed officials have acknowledged the impact of tariffs on the economy. Governor Christopher Waller noted that the trade war could force the central bank to cut rates to avert a recession, while Atlanta Fed President Raphael Bostic emphasized the need to control inflation amid rising tariff pressures.
Despite some positive market sentiment following the White House’s announcement that tariffs on smartphones, computers, and other electronics would be temporarily exempted, uncertainty remains. Trump also stated that he would explore tariff exemptions for the auto industry, though he warned that such exemptions would be temporary, fueling further uncertainty. This dynamic continues to support gold prices as the US Dollar remains under pressure.
Gold Price Eyes Further Upside, But Consolidation Likely
From a technical perspective, gold’s recent price action suggests that its uptrend is not yet over. The overnight resilience below $3,200 and the subsequent upward movement point to continued strength. However, the daily Relative Strength Index (RSI) is nearing overbought territory, signaling that a short-term consolidation or minor pullback may be prudent before positioning for further gains.
On the upside, gold faces resistance near the all-time high of $3,245-$3,246. A break above this level could pave the way for new record highs. On the downside, any pullback below the $3,200 mark may be viewed as a buying opportunity, with strong support near the $3,168-$3,167 region. A decisive break below this level could lead to a deeper correction, with potential targets at $3,136, $3,115, and $3,100.
The upcoming release of the Empire State Manufacturing Index and Fed Chair Jerome Powell’s speech on Wednesday will be key events to watch, as they may influence the US Dollar and provide further direction for gold prices.
