Gold prices remained above the $3,000 mark for the second consecutive day on Wednesday, though the metal failed to build on recent gains. Despite this, persistent concerns about a potential US recession and expectations for Federal Reserve rate cuts continue to support the yellow metal.
Gold (XAU/USD) traded comfortably above the psychological $3,000 level, though it stayed below the previous day’s high. The uncertainty surrounding US President Donald Trump’s planned reciprocal tariffs next week continues to drive demand for gold as a safe-haven asset. At the same time, a weaker US Dollar (USD), fueled by disappointing US economic data, has provided additional support for gold.
Market sentiment was further boosted by growing expectations that the Federal Reserve might soon resume its rate-cutting cycle, as fears of a US recession linger. This environment has created a favorable backdrop for gold, a non-yielding asset that benefits from lower interest rates. However, a generally positive risk tone in global markets has capped gold’s upside, with traders awaiting the release of the US Personal Consumption Expenditure (PCE) data on Friday before making further moves.
Market Drivers: US Economic Data, Fed Expectations, and Trade Concerns
The US Dollar faced pressure after data revealed that the Conference Board’s US Consumer Confidence Index fell for the fourth consecutive month, reaching a four-year low of 92.9 in March. Additionally, the Expectations Index, a measure of future economic outlook, dropped to 65.2, its lowest level in 12 years, signaling potential recession risks.
These developments come on the heels of the Federal Reserve’s recent downward revision of its growth outlook, largely driven by concerns over the impact of US trade policies, particularly Trump’s tariffs. Further support for gold came from reports that the reciprocal tariffs set for April 2 would be more targeted, easing inflation concerns and reinforcing expectations that the Fed may continue to cut rates. The Fed has already signaled two 25-basis-point rate cuts by year-end, with markets anticipating further cuts in June, July, and October.
In parallel, President Trump imposed a secondary tariff on Venezuela and announced that any country purchasing oil or gas from Venezuela would face a 25% tariff on US trade. Trump is also expected to announce retaliatory tariffs on major US trading partners, set to take effect on April 2, adding further uncertainty to global trade.
Meanwhile, geopolitical tensions eased slightly after Russia and Ukraine reached an agreement to halt military strikes in the Black Sea and energy infrastructure. Optimism surrounding China’s stimulus measures aimed at boosting consumption also contributed to a generally positive tone in equity markets, which has kept gold’s gains in check.
Technical Outlook: Gold’s Path Remains Positive
From a technical standpoint, gold’s resilience above the $3,000 mark remains bullish. The metal is showing positive momentum, with oscillators on the daily chart signaling potential further upside. A move above the previous high around $3,036 could pave the way for gold to test its all-time peak of $3,057-3,058, reached last week.
However, the $3,000 level remains a key support. A significant drop below this level could prompt technical selling and push gold prices toward the $2,982-2,978 range. A further decline could see gold testing the $2,956-2,954 area, marking important support zones.
As traders await critical data later in the week, gold’s future direction will largely depend on the broader economic outlook, Fed decisions, and ongoing geopolitical developments.
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