Gold prices extended their decline for the third consecutive trading day as market sentiment improved, fueled by news that the United States would impose reciprocal tariffs on specific trading partners. As of writing, XAU/USD is trading at $3,002, down 0.67%.
Wall Street is trading in positive territory, with stocks edging higher. However, the rising US Treasury bond yields and a strengthening US Dollar (USD) have kept gold prices from extending their recent rally, despite the yellow metal gaining over 13% this year. A Bloomberg article indicated that the Trump administration would target certain countries with tariffs starting April 2, moving away from broader measures to focus on specific trade partners known as the “Dirty 15.”
The Wall Street Journal reported that, according to data from last year, the US faces the largest goods trade deficits with countries including China, the EU, Mexico, Vietnam, Taiwan, Japan, South Korea, Canada, India, Thailand, Switzerland, Malaysia, Indonesia, Cambodia, and South Africa.
Economic Data and Market Sentiment
Data from S&P Global revealed mixed results for the US economy. The Flash PMIs showed contraction in manufacturing activity, while the services sector strengthened, indicating improvement from February’s figures. This divergence highlights continued softness in the industrial sector, largely driven by tariffs and concerns over rising prices.
Atlanta Fed President Raphael Bostic recently stated that he supports only one rate cut this year and does not expect inflation to return to target until around 2027. He also noted that inflation would likely remain volatile and emphasized that the Fed would not fall behind the curve.
The money market has priced in 62.5 basis points of Federal Reserve easing in 2025, according to data from the Prime Market Terminal’s interest rate probabilities.
Gold Price Pressure
Gold prices are under pressure due to rising US Treasury yields. The US 10-year T-note yield has surged by eight basis points to 4.331%. Additionally, US real yields, as measured by the US 10-year Treasury Inflation-Protected Securities yield, rose by almost 2 basis points to 1.980%, which typically has an inverse correlation with bullion prices.
The US Dollar Index (DXY), which tracks the value of the dollar against a basket of six currencies, rose by 0.20%, reaching 104.35.
The March S&P Global Manufacturing PMI showed a sharp deterioration in US factory activity, falling from 52.7 to 49.8, indicating contraction and missing expectations for a 51.7 expansion. On the other hand, the S&P Global Services PMI surged from 51.0 to 54.3, exceeding forecasts of 50.8 and pointing to strong service sector growth.
XAU/USD Technical Outlook
Gold prices continue to show an uptrend, although traders are taking profits as XAU/USD drops below $3,010, approaching the $3,000 level. A break below $3,000 would expose the February 24 swing high at $2,956, followed by the $2,900 mark and the 50-day Simple Moving Average (SMA) at $2,874.
On the other hand, if gold holds above $3,000, the first resistance level is at the March 21 peaks of $3,047, followed by the year-to-date high of $3,057 and the $3,100 level.
In summary, while gold prices are facing short-term pressures from a stronger US dollar and rising yields, the broader uptrend remains intact. The key support and resistance levels will guide traders in the coming days as the market reacts to ongoing economic developments.
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