Gold prices (XAU/USD) experienced a slight pullback after reaching a fresh weekly high earlier on Thursday, with the metal trading just below the $3,030 mark as the European session approached. The retreat in gold prices comes amid a rebound in global risk sentiment, as evidenced by a turnaround in US equity futures. Additionally, rising US Treasury bond yields further capped gold’s upside potential.
Investors remain cautious due to uncertainty surrounding US President Donald Trump’s impending reciprocal tariffs, set to take effect on April 2. This uncertainty, combined with expectations that the Federal Reserve (Fed) may soon resume its rate-cutting cycle, has provided some support for gold prices. A modest pullback in the US Dollar (USD) from a three-week high also adds to the bullish sentiment surrounding gold.
Market Drivers: Gold Supported by Trade Tensions and US Economic Outlook
The global risk sentiment took a hit on Wednesday following President Trump’s announcement of new auto tariffs, contributing to renewed demand for gold as a safe-haven asset. The uncertainty over the impact of Trump’s trade policies also led to a downward revision of the US growth outlook by the Federal Reserve. The Fed signaled that it might implement two 25-basis-point interest rate cuts in 2025, overshadowing the positive US macroeconomic data released earlier in the week, which weighed on the US Dollar.
Despite upbeat economic data, including a 0.9% increase in Durable Goods Orders for February and a 0.7% rise in Core Durable Goods, the USD’s advance was limited. The data, though better than expected, failed to sustain the USD’s rally. Chicago Fed President Austan Goolsbee expressed concerns about economic uncertainty, suggesting that the next rate cut may take longer than anticipated. Minneapolis Fed President Neel Kashkari also noted that while progress has been made in reducing inflation, more work is needed to reach the Fed’s 2% target.
In addition, St. Louis Fed President Alberto Musalem stated that there is no urgency to cut rates, as restrictive policies are still necessary to curb inflation. He also noted that tariffs could push prices higher, contributing to inflationary pressures.
Focus Shifts to US Economic Data and Fed Remarks
Traders are now looking ahead to Thursday’s US economic data releases, including the final Q4 GDP print, weekly initial jobless claims, and pending home sales data. These releases, along with upcoming speeches from key Federal Reserve officials, will likely influence USD demand and provide short-term trading opportunities for gold.
The market’s attention will also be fixed on the US Personal Consumption Expenditure (PCE) Price Index, due on Friday. The PCE data could offer insights into the Fed’s future interest rate plans, which will significantly impact both the USD and gold prices.
Technical Outlook: Gold Poised for Further Gains Above $3,000 Support
From a technical perspective, gold’s resilience above the psychological $3,000 level remains a bullish signal. This support level, coupled with positive momentum on the daily chart, suggests that gold could continue its upward trajectory. A break above the $3,057-$3,058 region, which marked the all-time high in March, could signal further gains, extending the established uptrend that has been in place for the past four months.
On the downside, gold faces immediate support in the $3,020-$3,019 range, followed by the critical $3,000 psychological level. If prices fall below this mark, the next support levels to watch are at $2,982-$2,978, with a further decline towards $2,956-$2,954 possible if the market breaks through these key levels. A sustained downward move could trigger technical selling and lead to deeper losses.
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