Gold prices (XAU/USD) have shown signs of recovery after dipping to a three-day low during the early European session on Friday. However, the metal continues to exhibit a negative bias for the second consecutive day, trading just above the $3,030 mark. The US Dollar (USD) maintains strength following the Federal Reserve’s (Fed) forecast of only two 25 basis points (bps) rate cuts by year-end, leading traders to take profits and reduce their bullish positions on gold as the weekend approaches.
Despite this, there is growing conviction among investors that the US central bank may resume its rate-cutting cycle sooner than anticipated, driven by concerns over a tariff-induced slowdown. This could put pressure on the USD and provide some support to gold, a non-yielding asset. Furthermore, ongoing uncertainty regarding US President Donald Trump’s trade policies and geopolitical risks could limit any significant downward movement in the XAU/USD pair, which appears set to post gains for the third week in a row.
Gold Faces Downward Pressure as USD Gains Momentum
For the third consecutive day, the US Dollar attracts buyers, continuing its bounce from a multi-month low earlier in the week, which exerts downward pressure on gold during the Asian session on Friday. Investor concerns remain high over President Trump’s threatened reciprocal tariffs, scheduled to take effect on April 2, in addition to a flat 25% duty on steel and aluminum since February.
Meanwhile, US Senator Steve Daines is set to visit China for trade talks, marking the first high-level political meeting since President Trump’s return to try to revive stalled trade negotiations amidst growing tariff tensions.
On the geopolitical front, Russia and Ukraine have intensified aerial attacks, with Ukraine targeting Russia’s Engels airbase in the Saratov region, causing explosions and a fire. Russia’s military has also launched 171 drones over Ukraine. Additionally, Russian and US officials are set to hold talks in Saudi Arabia on Monday regarding the ongoing conflict.
In Israel, heavy strikes resumed across Gaza on Tuesday, breaking a ceasefire with Hamas. This was followed by Hamas firing rockets at Israel on Thursday, though no casualties were reported.
The Federal Reserve recently signaled that it will implement two 25 basis point rate cuts by the end of the year, revising its growth outlook due to concerns about the impact of Trump’s trade policies. Fed Chair Jerome Powell stated that tariffs are likely to stifle economic growth, and investors now expect the Fed to cut rates during its June, July, and October meetings.
The possibility of further rate cuts may limit the USD’s gains, offering a potential tailwind for gold, especially in the absence of major US economic releases.
Technical Analysis: Gold Needs to Break $3,020 for Further Declines
From a technical standpoint, the recent decline in gold prices can be attributed to profit-taking amid slightly overbought conditions. However, the lack of sustained selling suggests caution for bearish traders, and the market has yet to confirm a near-term top. A further decline below the $3,023-$3,022 range may present a buying opportunity, with strong support expected near the psychological $3,000 level.
If this support level is broken decisively, technical selling could drive the price down to the intermediate support levels of $2,980-$2,978, with further potential to test the $2,956 zone. If the downward trend continues, gold could eventually reach the $2,930 support before testing the $2,900 mark and possibly revisiting last week’s swing low around the $2,880 region.
On the other hand, the $3,057-$3,058 zone, the all-time high reached on Thursday, now acts as an immediate resistance. A sustained break above this level would likely trigger renewed bullish momentum and extend the recent uptrend observed over the past three months.
Related topics:
- India Surpasses China in Gold Purchases, Buying 51% More in Three Months
- Qilu Bank Enhances Support for Small Businesses with Innovative Financial Tools
- Bitcoin Poised for a Surge Amid Gold’s Delivery Delays, Expert Claims
