The price of gold (XAU/USD) faced a slight retreat on Thursday, dipping over 0.19% to $3,042 as market sentiment turned cautious. The rally, which had previously taken gold to record highs, stalled after the Federal Reserve (Fed) announced its latest monetary policy decision and geopolitical tensions in the Middle East intensified.
Despite holding interest rates steady at 4.25%-4.50% for the second consecutive meeting and slowing the pace of quantitative tightening (QT), the Fed’s neutral stance on future rate hikes failed to inspire further upward momentum in gold prices. Gold traders had hoped for more dovish signals, but instead, the Fed’s revised projections indicated a slower economic outlook, with inflation and unemployment expected to rise. The Fed also emphasized that it would continue monitoring risks from both sides of its dual mandate—full employment and price stability.
Fed Chair Jerome Powell’s comments on increased uncertainty regarding the economic outlook and the impacts of tariff-induced inflation dampened any immediate enthusiasm in the markets. In particular, Powell noted that some of former President Trump’s trade policies had weighed on growth and contributed to rising prices, adding to concerns about future inflation.
Meanwhile, escalating hostilities in Gaza, with ongoing Israeli airstrikes causing civilian casualties, further complicated the global risk environment, making investors hesitant to take on significant positions in gold despite its status as a traditional safe-haven asset.
Market Movers and Technical Outlook
In broader market movements, the U.S. Dollar Index (DXY), which tracks the performance of the dollar against six major currencies, rose by 0.34% to 103.80. This rebound in the dollar weighed on gold prices, which typically move inversely to the greenback. U.S. Treasury yields also ticked higher, with the 10-year T-note yield recovering to 4.183%, signaling a recovery in real yields.
The market is now pricing in two rate cuts by the Fed in 2025, which is helping to keep gold prices above the critical $3,000 mark. The U.S. labor market remains resilient, with initial jobless claims edging slightly higher to 223K, indicating continued strength in employment. However, manufacturing activity, as measured by the Philadelphia Fed Manufacturing Index, declined, signaling a slowdown in industrial growth.
XAU/USD Technical Outlook
From a technical perspective, gold remains in an upward trend despite the current pullback. The formation of a Doji candlestick suggests potential consolidation or a slight retracement before resuming the rally. The Relative Strength Index (RSI) is in overbought territory, currently above 70, but is expected to dip as traders take profits, which could give bears a short-term opportunity.
Support levels for XAU/USD are seen at $3,000 and $2,954 (the February 20 daily high), with further downside targets at $2,900. However, if gold prices rise above $3,050, they could challenge the $3,100 level, maintaining the bullish momentum for the foreseeable future.
Conclusion
Gold’s price movement continues to be influenced by both domestic economic conditions and global geopolitical risks. While the Fed’s cautious stance on rate hikes and its downward revision of growth projections suggest ongoing uncertainty, geopolitical tensions, particularly in Gaza, also weigh heavily on market sentiment. Traders remain cautious, awaiting further developments in these areas while keeping a close eye on key technical levels for gold’s next move.
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