Gold (XAU/USD) has held steady above the $3,100 mark, continuing to benefit from persistent safe-haven demand as global uncertainties persist. During the early European session on Wednesday, gold price remained near the lower end of its daily range but showed resilience despite the overnight pullback from a fresh all-time high. This stability comes as traders remain cautious in the lead-up to President Donald Trump’s anticipated reciprocal tariffs announcement, which is fueling ongoing worries about the economic fallout from his trade policies.
Safe-Haven Demand Fuels Gold Price
The uncertainty surrounding President Trump’s aggressive trade policies, particularly the imposition of tariffs and their potential impact on the global economy, continues to drive investors toward gold. The concern over the economic ramifications of the tariffs is compounded by geopolitical tensions, further strengthening the safe-haven appeal of gold.
Additionally, economic data from the U.S. has contributed to the support for gold. Recent reports suggest a combination of slowing economic growth and persistent inflation, raising fears of stagflation—a period of stagnating economic growth combined with rising inflation. This could prompt the Federal Reserve to resume its rate-cutting cycle, which would weaken the U.S. dollar and, in turn, bolster gold’s attractiveness as a non-yielding asset.
Economic Data Drives Fed Rate-Cut Expectations
A series of disappointing U.S. economic reports have intensified concerns about the future direction of the economy. The U.S. ISM Manufacturing Purchasing Managers Index (PMI) dropped from 50.3 to 49 in March, indicating that business activity contracted for the first time in three months. Moreover, inflation at the factory gate surged to the highest level in nearly three years, while the Employment Index highlighted a sharp decrease in payrolls in the manufacturing sector.
The Job Openings and Labor Turnover Survey (JOLTS) also revealed a decline in job openings, dropping to 7.56 million from 7.76 million the previous month. These signs of economic slowdown, combined with sticky inflation, have led the markets to price in an 80-basis-point rate cut by the Federal Reserve later in the year, weakening the U.S. dollar and supporting gold’s rally.
Gold’s Technical Outlook: Key Levels to Watch
From a technical perspective, the pullback from gold’s recent all-time peak stalled near the $3,100 level, which is seen as a crucial support point. A rebound from this level suggests bullish sentiment, although the Relative Strength Index (RSI) is well above 70, indicating overbought conditions. This could lead to some consolidation or a modest pullback before gold resumes its upward trajectory.
The $3,100 level is seen as a key support, and a break below this level could lead to further downside, with the next support zones at $3,076 and $3,058. If the price moves further down, the $3,036-$3,035 area could act as a strong support zone, with the $3,000 psychological mark acting as a major base for gold prices.
Outlook: Cautious Optimism for Gold
Despite the recent pullback, the broader trend for gold remains positive, with the path of least resistance likely to be to the upside, given the ongoing geopolitical and economic concerns. Investors are expected to remain cautious ahead of Trump’s tariff announcement and other key U.S. economic data, including the ADP private-sector employment report and Factory Orders data, which could influence both the U.S. dollar and gold prices in the short term.
For now, gold’s price action seems to be driven by a combination of tariff-related uncertainties, economic slowdown concerns, and investor demand for a safe-haven asset, with the $3,100 level serving as a critical pivot point.
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