Gold prices (XAU/USD) recovered from an earlier dip to the $2,924 level, climbing back toward the top end of its daily range as it approached its all-time peak ahead of the European session on Wednesday. The precious metal continues to draw strength from global economic concerns, particularly the possibility of a trade war fueled by U.S. President Donald Trump’s tariff plans. These fears, alongside growing expectations of further interest rate cuts from the U.S. Federal Reserve (Fed), are keeping the U.S. Dollar on the defensive and providing support for gold, a safe-haven asset.
However, traders have shown caution in placing new bullish bets on gold, preferring to wait for the release of the Fed’s January meeting minutes later this week. The minutes are expected to provide insights into the central bank’s future monetary policy, which could impact the direction of the U.S. Dollar and, in turn, influence the gold market. Meanwhile, optimism surrounding the delay of Trump’s reciprocal tariffs and the ongoing discussions aimed at resolving the Russia-Ukraine conflict have contributed to limiting gold’s gains, adding to the cautious sentiment.
Despite these factors, the overall market environment suggests that the path of least resistance for gold remains upward, as investor concerns over geopolitical risks and policy uncertainty continue to support the precious metal.
Geopolitical Tensions and U.S. Economic Data Fuel Gold’s Safe-Haven Appeal
Investor sentiment is still heavily influenced by fears of escalating global trade tensions, driven by Trump’s protectionist policies. These concerns, combined with expectations of continued policy easing from the Federal Reserve, are supporting demand for gold as a safe haven. A recent disappointing U.S. retail sales report, along with mixed inflation data, has led to speculation that the Fed may cut interest rates in its upcoming meetings. Fed Funds Futures indicate a 40 basis point rate cut could be on the horizon by the end of the year, keeping the U.S. Dollar from recovering fully from a two-month low.
San Francisco Fed President Mary Daly suggested on Tuesday that the central bank should maintain its current short-term borrowing rates until more progress is seen toward the 2% inflation target. As a result, investors are closely watching the release of the Fed’s January meeting minutes, which are expected to shed light on the central bank’s rate trajectory and its potential impact on gold.
Technical Outlook: Gold’s Bullish Potential Remains Intact
From a technical standpoint, gold’s recent price movement appears to be a consolidation phase following its surge to an all-time high. The daily Relative Strength Index (RSI) remains near overbought levels, signaling that the current range-bound trading may continue in the short term. However, the broader trend remains bullish, and the path of least resistance is likely to be upward, given the strong fundamentals supporting gold.
Support for gold is expected to emerge near the $2,900 level, with additional support around $2,878-2,876, marking the lower boundary of the short-term trading range. A break below this level could see gold prices test the $2,860-2,855 area, potentially moving toward $2,834 if the selling pressure continues. Failure to defend these support levels could prompt further technical selling, dragging gold down to the $2,815 region and possibly testing the $2,800 mark.
On the upside, the $2,940-2,942 zone, where gold recently reached its record high, is likely to act as a strong resistance. A sustained breakout above this level could trigger further bullish momentum, setting the stage for an extension of the uptrend that has characterized gold’s performance over the past two months.
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