Gold prices (XAU/USD) extended their upward momentum during early European trading hours on Friday, bolstered by concerns over US President Donald Trump’s proposed tariff plans and a drop in US bond yields. These factors have provided support for the precious metal, while traders also keep a close eye on upcoming economic data, including US Retail Sales for January.
Concerns over a potential global trade war intensified after Trump unveiled a plan on Thursday to impose reciprocal tariffs on any country that levies duties on US imports. While the full impact of these tariffs will not be felt until April 1, the announcement has added upward pressure to gold prices.
Additionally, a decline in US bond yields across various maturities has further supported the appeal of the yellow metal. However, the expectation that the US Federal Reserve will maintain its hawkish stance and keep interest rates elevated for an extended period could weigh on gold’s momentum, as the non-yielding asset faces competition from higher-yielding investments.
US Economic Data Shows Inflationary Pressures
Recent US economic data has contributed to market sentiment. The Producer Price Index (PPI) for January showed a 3.5% year-on-year increase, surpassing the market’s forecast of 3.2%, following a 3.3% rise in December. The core PPI, excluding food and energy, climbed 3.6% year-on-year in January, exceeding expectations and indicating persistent inflationary pressures.
Moreover, initial jobless claims for the week ending February 8 fell to 213,000, better than the consensus estimate of 215,000 and a slight improvement from the previous week’s revised figure of 220,000.
Gold’s Technical Outlook
On the technical front, gold remains in a strong uptrend, holding above its 100-day Exponential Moving Average (EMA), which suggests a continued positive outlook. However, caution is warranted, as the 14-day Relative Strength Index (RSI) has moved into overbought territory, exceeding the 70.0 mark. This suggests that the metal may be due for a correction before it can continue higher.
The immediate resistance for gold is seen around the $2,942-$2,943 range, the all-time high reached earlier this week. Should gold push beyond this level, the next target is $2,955, the upper boundary of the Bollinger Band. A sustained break above this level could open the door to the psychological $3,000 mark.
On the downside, the first key support is at $2,864, the February 12 low. Further declines could find support at $2,744, the January 29 low, with the crucial support area lying between $2,680 and $2,685, where the lower Bollinger Band and the 100-day EMA converge.
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