Gold prices (XAU/USD) continued to climb past the $2,900 mark on Tuesday, reaching a fresh daily high during the European session and reversing a significant portion of Monday’s decline, which had pushed prices to a one-week low. Investors remain concerned about the potential economic fallout from US President Donald Trump’s trade tariffs and ongoing geopolitical risks, driving demand for the safe-haven asset.
The market sentiment is further supported by expectations that a tariff-induced slowdown in US growth may compel the Federal Reserve (Fed) to implement multiple interest rate cuts throughout the year. This has kept US Treasury bond yields subdued, dragging the US dollar (USD) closer to a multi-month low, providing additional support for gold, a non-yielding asset. However, traders are expected to exercise caution and hold off on placing large bullish bets on gold ahead of the US inflation data due this week.
Geopolitical Tensions and Economic Concerns Drive Gold’s Ascent
Gold’s rebound from Monday’s low is largely attributed to increased demand for safe-haven assets amid global uncertainties. Investors have been seeking refuge in gold as concerns mount over Trump’s protectionist policies, which have raised fears of a potential US recession. Trump’s 25% tariffs on steel and aluminum imports will go into effect on Wednesday, and the administration is preparing for additional levies planned for April 2.
Furthermore, signs of a weakening US labor market have fueled speculation that the Federal Reserve may resume its rate-cutting cycle as early as June, keeping US Treasury yields low and the USD near multi-month lows. These factors have bolstered gold prices.
The geopolitical situation also remains volatile, with heightened tensions between the US and Ukraine. A failed meeting between US President Donald Trump and Ukrainian President Volodymyr Zelenskiy in February resulted in the suspension of US military aid to Ukraine. Investors are now bracing for further developments during a meeting between US officials and Ukrainian counterparts starting today. This could have a significant impact on gold’s price movement.
In addition, Ukrainian forces launched record drone strikes on Moscow hours before the US-Ukraine summit. Russian air defenses intercepted at least 11 drones targeting Moscow’s southern and southeastern districts. These developments add to the risk aversion in global markets, further supporting gold’s appeal.
US Inflation Data to Shape Gold’s Short-Term Outlook
Later in the North American session, traders will focus on the release of the Job Openings and Labor Turnover Survey (JOLTS) from the US. However, the market’s primary attention will be on the US inflation data, with the Consumer Price Index (CPI) due Wednesday and the Producer Price Index (PPI) on Thursday. These reports are expected to influence the US dollar and play a key role in determining gold’s near-term trajectory.
Technical Outlook: Gold Faces Key Resistance at $2,922-$2,924
From a technical perspective, gold’s overnight decline below the $2,900 mark triggered some bearish sentiment. However, the mixed signals from the daily chart suggest that traders may wait for confirmation before placing further bets. A sustained move below the $2,880 region, which represents a one-week low, could signal a further downturn, with potential support levels around $2,860 and $2,833-2,832.
On the upside, gold’s path to further gains is likely to encounter resistance near the $2,922-$2,924 area. If prices manage to break through this barrier, the next resistance level could be at $2,934, with potential for a retest of the record high near $2,956, which was last seen on February 24.
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