10 Apr 2025

Gold prices continue to draw safe-haven investments due to escalating trade tensions between the US and China. Anticipations of several interest rate cuts by the Federal Reserve are exerting downward pressure on the US Dollar, which in turn supports the value of the precious metal. Despite a robust recovery in risk sentiment, the XAU/USD pair remains resilient as a safe-haven asset.

On Thursday, during the early European session, gold prices (XAU/USD) experienced a pullback after reaching a new weekly high. Nevertheless, the prices maintain a positive outlook for the second consecutive day, remaining above the $3,100 threshold. Ongoing concerns regarding the intensifying US-China trade conflict, coupled with worries about a potential global economic slowdown driven by tariffs, continue to bolster demand for the safe-haven asset. Additionally, rising inflation expectations enhance gold's appeal as a safeguard against increasing prices.

At the same time, growing speculation regarding multiple interest rate reductions by the Federal Reserve in 2025, along with a new wave of selling pressure on the US Dollar, further supports the non-yielding gold price. However, XAU/USD bulls are hesitant to make new investments due to a significant recovery in global risk sentiment, which has been strengthened by US President Donald Trump's decision to pause tariffs. Traders are also cautious ahead of the upcoming release of US consumer inflation data.

Daily Digest Market Movers: Gold Prices Maintain Upward Trend Amid Intensifying US-China Trade Tensions, Ahead of US CPI Release

In less than a day following the implementation of significant new tariffs on Wednesday, US President Donald Trump unexpectedly reversed course, announcing a 90-day suspension of substantial duties on most countries. However, he increased the tariff rate on Chinese goods to 125% after China responded by imposing an additional 50% tariff on US imports.

Investors are increasingly concerned that a full-scale trade conflict between the two largest economies could fuel inflation and impede global economic growth. This anxiety contributed to a more than 2% increase in gold prices on Wednesday, marking its strongest performance since October 2023, despite a notable rebound in equity markets.

Traders have reduced their expectations for aggressive interest rate cuts by the Federal Reserve (Fed) following the release of the March FOMC meeting minutes, which indicated a unanimous agreement among officials that the US economy faces the risk of rising inflation. Additionally, several key Fed officials have advocated for a cautious stance regarding interest rate reductions.

Minneapolis Fed President Neel Kashkari emphasized that the threshold for rate cuts remains high, as tariffs could drive inflation. Similarly, Cleveland Fed President Beth Hammack remarked that current monetary policy is somewhat restrictive, expressing a preference for patience rather than making hasty decisions on interest rates.

In a related note, Richmond Fed President Tom Barkin cautioned that price increases due to tariffs could commence by June, necessitating a careful approach from the US central bank. Furthermore, St. Louis Fed President Alberto Musalem warned against the assumption that the Fed can overlook the inflationary impact of tariffs, suggesting that some effects may be long-lasting.

In response, traders have quickly adjusted their outlook, now anticipating that the Fed may resume its rate-cutting cycle in June, projecting a total reduction of 75 basis points throughout the year.

From a technical standpoint, the commodity demonstrated notable resilience beneath the 200-period Simple Moving Average (SMA) earlier this week, and the subsequent upward movement is advantageous for bullish traders. Additionally, the positive oscillators observed on the daily chart bolster the likelihood of further appreciation in Gold prices. Consequently, there is a strong possibility of continued strength that could lead to a retest of the all-time high, approximately in the $3,167-3,168 range reached earlier this month.

Conversely, if the price falls back below the $3,100 level, it may encounter significant support around the $3,065-3,060 area. This zone is expected to serve as a crucial pivot point; a decisive breach could render Gold prices susceptible to a more pronounced decline towards the psychological threshold of $3,000. This level aligns with the 200-period SMA on the 4-hour chart, which is also anticipated to act as a critical pivot point. A decisive break below this level could shift the near-term sentiment in favor of bearish traders.