Gold prices retreated slightly from their all-time high, trading around $3,220 during the first half of the European session on Monday. Despite this mild dip, the overall market sentiment remains positive, with equity markets showing strength. This has led to some profit-taking in gold, following its sharp rise. However, given the prevailing global uncertainties, particularly the escalating US-China trade tensions, any meaningful correction in gold’s price appears unlikely for the time being.
The outlook for gold continues to be supported by expectations that the Federal Reserve (Fed) will soon resume its rate-cutting cycle, possibly reducing borrowing costs at least three times in 2025. Concerns about a slowdown in the US economy, largely driven by tariff measures, have weighed on the US Dollar (USD), keeping it near its lowest level since April 2022. This weaker USD continues to act as a tailwind for gold, which remains a favored safe-haven asset.
Market Movers and Fundamentals: Gold Bulls Remain Cautious Amid Improving Risk Sentiment
On the geopolitical front, the US-China trade war continues to escalate. China raised tariffs on US imports to 125% in retaliation for President Trump’s decision to increase duties on Chinese goods to 145%. This further intensifies market concerns about a global economic slowdown, which has fueled demand for gold as a safe-haven asset, pushing prices to a new all-time high.
In the US, there has been a noticeable shift in investor sentiment as US Treasury yields spike. This suggests a lack of confidence in the US economy, as investors increasingly dump US government bonds. Additionally, expectations of more aggressive policy easing by the Fed, spurred by weak consumer inflation data, have kept the US Dollar depressed, providing further support for gold prices.
The US Bureau of Labor Statistics recently reported that the Consumer Price Index (CPI) for March fell by 0.1%, with the annual rate dropping to 2.4%, down from 2.8% in February. The core CPI, which excludes food and energy, also slowed to 2.8% from 3.0%. Traders are now pricing in around 90 basis points of Fed rate cuts by the end of 2025. This, combined with concerns over rising inflation due to tariffs, is likely to keep gold in favor as a hedge against inflation and contribute to its further appreciation in the near term.
Technical Outlook: Gold’s Near-Term Bias Remains Bullish
From a technical perspective, gold’s price is still in a bullish trend, though the Relative Strength Index (RSI) is nearing overbought conditions, hovering just above 70. As a result, some consolidation or a minor pullback could occur before the price continues to rise. Any downward movement could be seen as a buying opportunity, especially near the $3,200 mark, with support expected around the $3,168-$3,167 range. This region is likely to act as a strong base for gold’s price in the short term, with a focus on potential further gains in the longer term.
Investors will be closely watching comments from Federal Open Market Committee (FOMC) members, including Fed Chair Jerome Powell, scheduled for Wednesday. These remarks could provide important insights into the Fed’s future rate-cutting plans. Additionally, upcoming US Retail Sales data will likely influence demand for the USD, which could in turn provide further price movement for gold.
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