Gold prices (XAU/USD) maintained a positive bias during the Asian session on Thursday, trading near the $2,944 mark, just shy of the record-high reached the previous day. The metal’s upward momentum comes amid growing concerns that US President Donald Trump’s planned tariffs on imported goods could escalate into a global trade war. This uncertainty has bolstered demand for gold as a safe-haven asset. Additionally, the flight to safety has driven a further decline in US Treasury bond yields, providing additional support for the non-yielding precious metal.
Despite declining bond yields, the US Dollar (USD) has struggled to capitalize on a modest recovery this week from a two-month low, allowing gold prices to benefit further. The USD’s weakness has given a tailwind to USD-denominated commodities like gold. However, expectations that the Federal Reserve (Fed) will maintain a pause on interest rate hikes, bolstered by hawkish minutes from the Fed’s January meeting released on Wednesday, may limit gold’s rally. Overbought conditions, as indicated by the daily chart, could also cap any further upward movement for the precious metal.
Trade War Tensions Fuel Gold’s Safe-Haven Appeal
President Trump’s announcement on Wednesday that he plans to impose heavy tariffs on various products as early as next month has escalated concerns about global trade tensions. These fears are contributing to gold’s rise, with the metal benefitting from its status as a safe-haven asset. Trump also hinted at the possibility of a new trade agreement with China, though his rhetoric on tariffs remains a key market driver.
Further supporting gold, the USD has faced downward pressure as Treasury bond yields have continued to slide, reinforcing the precious metal’s appeal. Additionally, minutes from the Federal Open Market Committee’s (FOMC) January meeting revealed that officials remain cautious amid economic uncertainty, keeping expectations for a prolonged pause in interest rate cuts.
Fed Vice Chairman Philip Jefferson noted that the US economy has been performing well, with a solid labor market and easing inflation. However, inflation remains elevated, and the path to the Fed’s 2% target could be bumpy. Chicago Fed President Austan Goolsbee echoed these sentiments, stating that while inflation is easing, it remains too high to justify rate cuts. Despite this, the USD has failed to gain traction, and the negative bond yield environment continues to benefit gold.
Economic Data and Market Outlook
Looking ahead, Thursday’s US economic calendar includes the Weekly Initial Jobless Claims and the Philly Fed Manufacturing Index, both of which could influence USD movement and impact the XAU/USD pair. Additionally, market focus will shift to the release of flash global Purchasing Managers’ Indexes (PMIs) on Friday, offering insights into the global economic landscape and potentially adding further momentum to gold prices.
From a technical standpoint, gold’s Relative Strength Index (RSI) remains above the 70 level, signaling caution for bullish traders. The price action suggests a continuation of its range-bound movement, with the bias still tilted toward the upside. A sustained move above the $2,945-2,950 range would signal a fresh breakout and could extend the two-month uptrend.
In the event of a pullback, gold could find support near the $2,928 level, with further buying opportunities emerging around $2,918 and $2,900. A break below the $2,880 horizontal support would open the door for a deeper correction, potentially targeting the $2,860-2,855 area and further downward pressure toward the $2,800 region.
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