Gold prices regained some ground during the Asian session on Tuesday, bouncing back from a nearly four-week low, as concerns over US tariffs sparked renewed demand for safe-haven assets. The price of gold (XAU/USD) climbed from the $2,957-$2,956 range, where it had dipped the previous day, and is now attempting to recover from a three-day losing streak.
The recent decline in gold prices was triggered by concerns surrounding escalating trade tensions, particularly following the announcement of reciprocal tariffs by US President Donald Trump last week. The tariffs have raised fears of a global trade war, which could potentially lead to a worldwide economic slowdown, thereby bolstering demand for precious metals such as gold.
Safe-Haven Demand and US Economic Concerns
The rise in gold prices is primarily driven by increased safe-haven demand amid fears that a global trade war could push the economy into recession. Additionally, market participants are ramping up expectations for multiple interest rate cuts by the Federal Reserve in 2025, in response to a possible tariff-induced slowdown in the US economy. This expectation has kept a lid on the US Dollar’s recent recovery and provided further support to gold, which is viewed as a non-yielding asset.
A slight improvement in global risk sentiment, however, could limit further gains for gold. Traders are also awaiting key economic data, including the Federal Open Market Committee (FOMC) meeting minutes on Wednesday and the US Consumer Price Index (CPI) report due on Thursday, which may offer more clarity on the future path of interest rates.
Market Movers and Fed Policy Outlook
The rise in gold prices comes amid growing concerns about the economic fallout from President Trump’s aggressive trade policies. These concerns have triggered fresh US Dollar selling, further fueling demand for gold as a safe-haven investment.
There is also widespread market belief that the Federal Reserve is likely to resume its rate-cutting cycle in the near future, given the economic uncertainties caused by the tariffs. Trump himself has called for the Fed to cut interest rates, asserting that the US economy is strong enough to absorb such a move.
Despite the calls for lower rates, Federal Reserve Governor Adriana Kugler emphasized that the central bank’s priority remains controlling inflation, noting that short-term inflation expectations have risen but remain well-anchored in the longer term. Additionally, Chicago Fed President Austan Goolsbee warned that a global trade war could lead to supply disruptions and high inflation, further supporting the case for rate cuts.
Technical Outlook for Gold
From a technical perspective, gold faces a potential barrier near the $3,020 mark, where it has encountered resistance. Oscillators on the daily chart have begun to show negative momentum, though gold’s resilience near the 61.8% Fibonacci retracement level of the February-April rally suggests that the price may continue to find support near the $2,957-$2,956 area, which corresponds to the recent swing low.
A break below this support zone could signal a further pullback, with the next support levels around the 50-day Simple Moving Average (SMA) at $2,948-$2,947. Conversely, if gold manages to break above the $3,020 resistance, it could rise towards the $3,055-$3,056 zone, and potentially aim for the $3,100 mark, with intermediate resistance at $3,075-$3,080.
Looking Ahead
Gold’s price movement will remain closely tied to global trade developments, US economic data, and market expectations surrounding the Fed’s future monetary policy. As traders await further clues on the economic outlook, gold’s safe-haven appeal continues to attract attention, with its next moves likely shaped by the broader economic environment.
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