Gold prices (XAU/USD) experienced a significant retracement on Tuesday, surrendering much of its earlier intraday gains after hitting a fresh all-time high. The precious metal, which surged amid growing concerns about global trade tensions and geopolitical risks, is now trading near the lower end of its daily range during the first half of the European session. Despite this pullback, gold remains firmly above the $2,900 mark, maintaining its position as a safe-haven asset amid ongoing market uncertainties.
A key factor driving gold’s earlier rally was the announcement by US President Donald Trump, who imposed tariffs on commodity imports and signaled his intent to introduce reciprocal tariffs on other countries. This decision has heightened fears of a global trade war, prompting investors to turn to gold as a safe store of value. The imposition of these tariffs, coupled with geopolitical risks, has played into gold’s appeal, as it is traditionally seen as a hedge against market volatility and inflation.
Further fueling gold’s rise was the market expectation that Trump’s protectionist policies would lead to inflationary pressures within the US economy. Gold, often seen as a safeguard against rising prices, saw increased demand as traders anticipated that inflation would prompt the Federal Reserve (Fed) to maintain a hawkish stance in the coming months.
However, the strength of the US Dollar (USD) began to weigh on gold prices. The USD gained momentum, reaching its highest level in over a week, as investors speculated that Trump’s protectionist measures could reignite inflation and push the Federal Reserve to hold interest rates steady. A resilient US labor market and persistent inflation concerns have led market participants to believe that the Fed may adopt a more cautious approach regarding rate cuts in the near term. As a result, the strengthening USD has made gold less attractive to investors, especially given the current overbought conditions for the commodity.
In addition to the influence of US trade policy, Trump’s remarks regarding the Middle East have also contributed to market uncertainty. The US President stated that Hamas must release hostages by a specified deadline or face the cancellation of the Israel-Hamas ceasefire, further adding to geopolitical tensions. These developments have added to the volatility in global markets, driving some investors to seek refuge in gold as a safe-haven asset.
Despite the modest strength of the USD, some profit-taking in gold has been observed, especially as the commodity nears key technical resistance levels. The market appears to be repositioning itself ahead of the upcoming testimony from Federal Reserve Chair Jerome Powell, which is expected to provide insights into the Fed’s future policy direction. Powell’s comments will likely influence the near-term trajectory of both gold and the USD, as any hints of a shift in the Fed’s stance on interest rates could provide a new directional impetus for the commodity.
Technically speaking, if gold falls below the $2,900 level, the price is likely to find support near the $2,886-$2,882 zone. A continuation of the downside move could lead to further declines, with the $2,855-$2,852 region acting as an intermediate support. Below this, the $2,800 mark remains a critical level for the bulls. Should gold break decisively below $2,800, it could signal a deeper correction. However, such a move is likely to be limited, as dip-buying is expected to emerge around these key support levels.
On the upside, gold faces resistance around the $2,842-$2,843 region, where the recent swing high was recorded during the Asian session. With the Relative Strength Index (RSI) showing overbought conditions on the daily chart, gold bulls may pause at this level and await consolidation or a modest pullback before looking to push prices higher. While short-term price action may see some consolidation, the broader technical outlook remains bullish, with the path of least resistance likely to favor further upside for gold. This aligns with the broader uptrend seen in the market over the past two months, suggesting that any pullbacks may offer buying opportunities for investors looking to capitalize on the commodity’s long-term growth potential.
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