Gold prices (XAU/USD) retreated from their recent all-time high on Tuesday, falling to the $2,929 level during the first half of the European session. The drop came amid profit-taking, with no significant new fundamental triggers to drive the market. Despite the pullback, the downside remains limited, as ongoing concerns about US President Donald Trump’s protectionist trade policies and their potential impact on the global economy continue to support gold as a safe-haven asset.
At the same time, speculation that the Federal Reserve might cut interest rates further this year failed to provide significant momentum for the US Dollar (USD), which had bounced from a two-month low the previous day. This lack of support for the USD continues to bolster gold, helping limit deeper losses. Analysts suggest that it would be wise to wait for stronger selling signals before confirming a top for gold.
Trade War Fears and Fed Rate Cut Bets Favor Gold
The US Dollar’s move away from its lowest point in over two months prompted some profit-taking in gold prices on Tuesday, as the metal appeared slightly overbought on the daily chart. On Monday, President Trump confirmed that tariffs on Canadian and Mexican imports remain “on time and on schedule,” and reciprocal tariffs on other countries will proceed as planned. This announcement raised concerns about a further escalation in trade tensions, contributing to fears over global economic impacts and reinforcing the demand for gold.
Weaker US macroeconomic data recently reinforced expectations of a possible two-quarter-point interest rate cut by the Federal Reserve later this year, adding support for gold’s appeal as a non-yielding asset. However, Chicago Fed President Austan Goolsbee stated that the Fed would take a cautious “wait-and-see” approach and require more clarity before considering additional rate cuts.
Additionally, recent data from the World Gold Council (WGC) showed the largest weekly inflow into physically backed gold exchange-traded funds (ETFs) since March 2022, highlighting ongoing investor interest in gold.
As traders look ahead to the US economic calendar, attention will focus on the Conference Board’s Consumer Confidence Index and the Richmond Manufacturing Index. These, along with comments from key Federal Reserve officials, could impact the USD and, consequently, gold prices. However, the market’s primary focus remains on the release of the US Personal Consumption Expenditure (PCE) Price Index on Friday, which could offer insights into the Fed’s future rate-cut strategy.
Gold Price Nears Support at $2,920, Bullish Outlook Remains
Despite recent consolidation in gold’s price action, which some analysts view as a bullish pause after its record highs, the daily Relative Strength Index (RSI) is nearing the overbought zone, suggesting that a short-term pullback could be in the cards. While a modest correction might occur, the overall market sentiment remains strongly bullish, with the bias still tilted toward higher prices.
Support levels in the near term are seen around the $2,920-2,915 range, which aligns with the lower end of a multi-day trading range. Should these levels hold, gold prices could resume their upward trajectory. Further support is located at $2,900, followed by the $2,880 zone. A break below this support could lead to a deeper pullback toward the $2,860-2,855 region, with the possibility of testing the $2,834 level. In the event of a more significant selloff, the price may dip to the $2,800 level.
While the near-term consolidation could result in some price fluctuations, the long-term outlook for gold remains positive amid ongoing geopolitical uncertainties and expectations of further Fed rate cuts.
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