Gold prices (XAU/USD) have continued their sideways consolidation, holding steady above the $2,900 mark during the early European session on Monday. Despite several supportive factors, the precious metal has struggled to attract significant buying interest, remaining confined within a narrow range for the past week.
Investors remain cautious amid concerns over the economic fallout from U.S. President Donald Trump’s trade tariffs and the possibility of a global trade war, both of which continue to drive demand for gold as a safe-haven asset. Additionally, Friday’s weaker-than-expected U.S. jobs report further reinforced market expectations that the Federal Reserve (Fed) will implement multiple interest rate cuts throughout the year. This anticipation has been another factor bolstering gold, which benefits from a lower-interest-rate environment.
The U.S. dollar (USD), weighed down by these expectations of policy easing by the Fed, remained near its lowest level since November, providing additional support to gold prices. However, despite these favorable conditions, gold has struggled to break out of its recent range, which has prompted caution among aggressive bullish traders. Investors are hesitant to position themselves for a sustained uptrend without further economic developments from the U.S.
Trade War Fears and Uncertainty Over Tariffs Continue to Support Gold
The ongoing uncertainty surrounding U.S. trade policies, particularly under President Trump’s protectionist agenda, has kept investors on edge. Trump’s tariffs, especially on Canada, are seen as potentially slowing U.S. economic growth, which could push the Fed to resume its rate-cutting cycle as early as June. Trump also recently signaled a potential delay in imposing tariffs on Canada, a move that adds to the unpredictability of the global trade situation.
Fed Chair Jerome Powell acknowledged the high levels of uncertainty surrounding the economic impact of these policies, while San Francisco Fed President Mary Daly indicated that although rising uncertainty among businesses could dampen U.S. economic demand, it does not yet justify changes to interest rate policy.
Furthermore, U.S. employment data released on Friday showed signs of slowing in the labor market, which reinforced market expectations of further rate cuts. The February Nonfarm Payrolls report revealed that the economy added 151,000 jobs, below the 160,000 consensus estimate, while the previous month’s figure was revised downward. Additionally, the unemployment rate unexpectedly edged up to 4.1% from 4.0% in January, overshadowing a slight rise in average hourly earnings.
Traders Price in Rate Cuts as Gold Faces Range-Bound Trading
As traders now price in approximately three rate cuts of 25 basis points each by the end of 2025, the U.S. Treasury bond yields have dropped, which has kept the USD under pressure. Despite these supportive factors, gold’s price has remained trapped within its recent range, with bulls hesitant to push the metal higher without a more definitive catalyst.
From a technical standpoint, gold has shown some resilience below the $2,900 level. Oscillators on the daily chart, although losing some momentum, remain in positive territory. However, the repeated failure to break through the $2,925-2,930 resistance zone suggests that investors may need to wait for strong follow-through buying before committing to fresh bullish positions.
A breakout above this resistance could see gold testing its all-time high of around $2,956, which was reached in February. Conversely, if gold falls below the $2,895-$2,900 support zone, it could trigger technical selling, pushing the price lower towards the $2,860-2,858 range. Further declines could lead to a test of the February 28 swing low around $2,833-2,832, with the potential for a move toward the $2,800 mark.
In conclusion, while several factors remain supportive for gold, its price continues to struggle for a firm direction. Investors should remain cautious and wait for a decisive breakout before positioning themselves for a sustained move in either direction.
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