Gold prices entered a phase of bullish consolidation on Monday, oscillating around the $3,230 mark, just below the fresh all-time high reached earlier in the Asian session. The market is experiencing a brief pause as prices approach slightly overbought conditions on the daily chart. Despite this temporary slowdown, the overall fundamental outlook suggests that the path of least resistance for gold remains upward.
U.S. President Donald Trump’s decision to pause sweeping reciprocal tariffs for 90 days last week provided a temporary reprieve for markets. However, rising U.S.-China trade tensions continue to weigh on investor sentiment, reinforcing demand for the safe-haven asset.
Market Drivers: Economic Concerns and Fed Expectations
Recent developments in the U.S. bond market have raised concerns that confidence in the U.S. economy may be faltering. Data released last Thursday revealed that U.S. inflation had cooled to a six-month low in March, supporting expectations that the Federal Reserve (Fed) will soon resume its rate-cutting cycle. With the Fed anticipated to lower borrowing costs at least three times this year, the U.S. dollar has slumped to its lowest levels since April 2022. This weakening of the dollar has provided a tailwind for gold, as the non-yielding metal tends to benefit in a low-interest-rate environment.
Gold Price Supported by U.S.-China Trade Tensions
The ongoing trade conflict between the U.S. and China continues to be a significant driver of gold’s price action. Last Friday, China raised tariffs on U.S. imports to 125% in retaliation for President Trump’s decision to increase duties on Chinese goods to 145%. This escalation has stoked fears of slower global economic growth, further bolstering demand for gold as a safe-haven asset. As a result, gold prices surged to new record highs.
Inflation Data and Fed Policy Impact on Gold
The release of U.S. inflation data last week revealed a sharp cooling of consumer prices. The Consumer Price Index (CPI) fell by 0.1% in March, while the annual rate slowed to 2.4% from 2.8% in February. Core CPI, excluding food and energy, rose just 0.1%, marking its lowest annual rate in nearly four years. These data points have reinforced expectations that the Fed will continue to ease monetary policy, which could keep the U.S. dollar weak and further benefit gold.
Traders are now pricing in around 90 basis points of Fed rate cuts by the end of 2025, a development likely to continue supporting flows into gold as a hedge against inflation. Additionally, the ongoing tariff dispute is expected to push inflation higher in the coming months, which could further enhance gold’s appeal.
Market Outlook: Fed Comments and Retail Sales Data
This week, market participants will focus on comments from key Federal Open Market Committee (FOMC) members, including Fed Chair Jerome Powell, scheduled for Wednesday. These remarks are expected to provide insights into the future path of interest rates. Additionally, the U.S. monthly Retail Sales figures, due on Wednesday, will likely influence demand for the U.S. dollar and could have a meaningful impact on gold prices in the latter part of the week.
While gold’s current price consolidation suggests a pause in momentum, slightly overbought conditions on the daily Relative Strength Index (RSI) may signal the need for a short-term pullback before a further upward move.
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