Gold prices continue to trade with a positive bias above the $3,000 psychological level for the second consecutive day on Wednesday, despite lacking strong follow-through and staying below the previous overnight high. The price remains supported by the ongoing concerns regarding US President Donald Trump’s tariffs, especially the anticipated reciprocal tariffs due to be imposed on April 2. This uncertainty continues to bolster demand for gold as a safe-haven asset.
Key Drivers Behind Gold’s Performance
US Tariff Uncertainty: The markets remain on edge as investors await Trump’s announcement on reciprocal tariffs. There are fears that these tariffs could trigger inflation and further harm economic growth, prompting more interest in gold.
US Economic Data: The US Consumer Confidence Index for March dropped to a four-year low of 92.9, signaling growing recession fears. The Expectations Index reached its lowest point in 12 years, reinforcing concerns that the US economy could be heading toward a downturn. This has added support to gold, especially in light of expectations that the Federal Reserve (Fed) may resume its rate-cutting cycle.
Fed’s Rate Cut Expectations: With the Fed likely to lower rates amid fears of an economic slowdown, gold—being a non-yielding asset—benefits. The market is pricing in rate cuts for the upcoming June, July, and October policy meetings, which could support gold prices further.
Geopolitical Developments: There has been a diplomatic breakthrough between Russia and Ukraine, with an agreement to halt military strikes in the Black Sea, easing some geopolitical tensions. Meanwhile, China’s stimulus plans aimed at boosting consumption have helped to support positive sentiment in global equity markets, somewhat capping gold’s upside.
Technical Outlook
Immediate Resistance: Gold is facing resistance around the $3,036 level. A break above this level would likely trigger more buying and could push prices toward the all-time high of $3,057-3,058, touched last week.
Support Levels: The $3,000 level continues to act as a key support zone for gold. If this level is broken, it could lead to a deeper correction, with the next support levels near $2,982-2,978 and potentially extending further towards $2,956-2,954.
Market Sentiment and Next Steps
Gold remains in a bullish trend, supported by geopolitical concerns, economic uncertainty, and expectations of Fed rate cuts. However, the US Dollar has regained some traction, which could limit gold’s upside. Additionally, US economic data, particularly the PCE Price Index set for release on Friday, will be pivotal in determining the next phase of gold’s movement. If the PCE data signals further economic weakness, it could reinforce the bullish case for gold.
Conclusion
Gold prices are expected to maintain their positive bias in the near term, with any pullback likely to be temporary. As long as $3,000 holds as support, gold could continue its upward trajectory, aiming for new highs. Traders should watch for the release of key economic data and any new developments regarding US tariffs that could further influence gold’s price action.
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