Gold prices (XAU/USD) face challenges in building on Friday’s modest recovery, starting the week on a weaker note. Despite a bounce from levels just below the key $3,000 mark, gold fails to capitalize as positive global risk sentiment takes hold. The optimism stems from reports indicating that US President Donald Trump’s upcoming reciprocal tariffs will be less severe than initially feared. This has helped ease concerns about their potential negative impact on the global economy, boosting investor confidence and weighing on gold for a third consecutive day.
The US Dollar (USD) also maintains its recent gains after last week’s modest recovery from a multi-month low, further undermining demand for gold. However, there is ongoing uncertainty about the future pace of US economic growth due to tariff-driven slowdowns, leading to expectations that the Federal Reserve (Fed) may resume its rate-cutting cycle soon. These factors are keeping USD bulls cautious and may limit any sharp decline in gold prices. Additionally, geopolitical risks continue to support gold’s status as a safe-haven asset, preventing a substantial fall in its price.
Market Dynamics and Geopolitical Tensions
Reports over the weekend revealed that President Trump plans to implement a narrower and more targeted set of reciprocal tariffs, scheduled to take effect on April 2. This has fueled risk appetite in markets, pushing investors toward riskier assets and diminishing gold’s appeal as a safe haven.
Amid ongoing geopolitical tensions, US officials have been engaged in peace talks with Ukrainian representatives, with further discussions set to occur with Russian officials. This diplomatic effort, coupled with an earlier agreement between Presidents Trump and Putin to pause Russian strikes on Ukrainian energy facilities, adds to the positive risk tone in the market.
Fed Outlook and US Dollar Movement
The US Dollar held steady near a one-and-a-half-week high, bolstered by the Federal Reserve’s outlook, which indicates two 25-basis-point rate cuts by year’s end. This, however, continues to weigh on gold, as a stronger USD reduces gold’s attractiveness.
At the same time, Fed Chair Jerome Powell acknowledged that tariffs are likely to dampen US economic growth. Despite this, traders anticipate rate cuts at the June, July, and October Fed meetings, which could limit the USD’s upside and lend some support to gold prices.
Escalating Tensions in the Middle East
Geopolitical risks are also heightened by continued violence in Gaza and recent missile attacks by Iran-backed Houthis in Yemen, including an intercepted ballistic missile aimed at Israel. The US military conducted airstrikes in Yemen’s Saada province in response, while tensions between Israel and the Houthis are escalating. These developments could further intensify geopolitical uncertainty, providing ongoing support for gold as a hedge against instability.
Looking Ahead: Key Data and Technical Levels
Traders will focus on the release of global PMI data on Monday, which will provide insight into global economic conditions and influence market sentiment. However, attention will primarily be on the US Personal Consumption and Expenditure (PCE) Price Index set to be released on Friday, which will provide more clarity on inflation trends.
From a technical perspective, gold prices need to maintain support near the $3,000 level to avoid a more significant decline. A decisive break below this mark could trigger additional selling, potentially pushing gold toward the $2,982-$2,978 region. Further declines may extend toward the $2,956-$2,954 support zone.
On the other hand, the all-time high around $3,057-$3,058, touched last week, serves as an immediate resistance level. With the daily Relative Strength Index (RSI) retreating from overbought territory, any subsequent buying activity could signal a continuation of the upward trend, extending the rally observed over the past three months.
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