Gold prices (XAU/USD) have maintained a bullish trend for the fourth consecutive day, reaching new all-time highs during the Asian session on Tuesday. The surge is largely driven by growing uncertainty surrounding US President Donald Trump’s anticipated announcement of reciprocal tariffs later today, which has heightened concerns over global economic stability. As a result, investors have flocked to gold as a safe-haven asset, further supported by ongoing geopolitical tensions.
The market sentiment has been further influenced by the increasing likelihood that the Federal Reserve (Fed) will soon resume its rate-cutting cycle. This expectation arises from fears that a tariff-induced slowdown could hinder US economic growth. As a result, US Treasury bond yields have remained low, preventing the US Dollar (USD) from gaining significant strength and offering additional support to the price of gold. The strong momentum in gold prices seems largely unaffected by any improvements in global risk sentiment, which typically would dampen demand for the precious metal.
Market Overview: Trade Uncertainty Drives Demand for Gold
President Trump’s recent comments have fueled concerns about the potential for a broader global trade war. He clarified that his planned reciprocal tariffs would apply to nearly all countries, a statement that has dashed hopes that only nations with significant trade imbalances would be affected. This move adds to his previously imposed 25% tariffs on steel and aluminum imports, as well as auto imports, further escalating global trade tensions.
Compounding these concerns is the growing belief that a slowdown in US economic activity, driven by tariffs, could force the Fed to cut interest rates again, despite persistent inflationary pressures. These expectations have already driven gold prices to their strongest quarter since 1986 and pushed them to a new record high on Tuesday.
Markets are currently pricing in the possibility that the Fed will lower interest rates by 80 basis points by the end of 2025, keeping US Treasury bond yields depressed. As a result, the US Dollar has failed to attract significant buying interest, allowing gold’s non-yielding appeal to strengthen further.
Geopolitical Tensions Add Fuel to the Bullish Gold Trend
Geopolitical risks have also contributed to gold’s rise. On Monday, Ukrainian officials reported that Russian forces had bombed Kharkiv for the second consecutive night, adding to the region’s ongoing instability. Ukrainian President Volodymyr Zelenskyy stated that Russia had launched over 1,000 drones in the past week alone, urging the US and other international allies to take action.
Meanwhile, Israel’s recent military actions have escalated tensions in the Middle East. Following the end of a ceasefire with the Hamas militant group, Israel resumed air and ground strikes and issued mass evacuation orders in Rafah, signaling the potential for further escalation. These developments continue to drive demand for safe-haven assets like gold.
Key US Economic Data and Upcoming Tariff Announcement Remain in Focus
Traders are now eyeing several key US economic reports scheduled for release this week, starting with the JOLTS job openings and the ISM Manufacturing PMI on Tuesday. Other important reports include the ADP employment report on Wednesday, the ISM Services PMI on Thursday, and the highly anticipated US Nonfarm Payrolls (NFP) on Friday. However, the most immediate focus will remain on President Trump’s reciprocal tariffs announcement, scheduled for later today at 19:00 GMT. This event could have a significant impact on market sentiment and the USD, providing further direction for gold prices.
Technical Outlook: Gold Bulls May Need a Pause Before Further Gains
From a technical standpoint, the Relative Strength Index (RSI) for gold is currently well above the 70 mark, indicating overbought conditions. As such, traders may need to wait for a period of consolidation or a modest pullback before considering further upward moves. However, the recent breakout above $3,100 and subsequent price action suggest that gold’s upward trajectory remains intact. Any potential corrective pullbacks are expected to be limited, presenting buying opportunities for those looking to capitalize on gold’s long-term bullish trend.
In the short term, the $3,128-$3,127 range could act as immediate support, followed by the $3,100 level. A break below this support could trigger a correction, possibly pushing gold prices towards the $3,076 area or the previous swing low. On the downside, further support can be found near the $3,057-$3,058 zone, followed by the psychological $3,000 mark, which remains a key level for short-term traders.
Conclusion
Gold prices are poised to continue their upward trajectory, driven by trade uncertainties, geopolitical tensions, and the Fed’s anticipated rate cuts. Investors are closely monitoring key macroeconomic data releases and President Trump’s upcoming tariff announcement, which will likely have a significant impact on gold’s price action in the near term. While gold’s momentum remains strong, technical indicators suggest a brief consolidation may be in order before further gains.
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