18 Feb 2025

Gold continues to attract buyers for the second consecutive day, driven by concerns regarding a potential global trade war. Speculations surrounding further interest rate cuts by the Federal Reserve provide additional support for the non-yielding yellow metal. Despite a rebound in US bond yields and a slight increase in the US Dollar, these factors have minimal impact on the XAU/USD pair.

On Tuesday, the price of gold (XAU/USD) builds on the modest gains from the previous day, rising for the second day in a row. The commodity maintains a positive tone during the early European session, currently trading around the $2,913 mark, reflecting an increase of over 0.50% for the day. Ongoing fears that US President Donald Trump's proposed reciprocal tariffs could instigate a global trade war continue to enhance demand for this safe-haven asset. Additionally, expectations that the Federal Reserve may implement further interest rate cuts bolster the appeal of gold.

Furthermore, the intraday increase appears largely unaffected by a notable rise in US Treasury bond yields and a slight recovery in the US Dollar from its lowest point since December 17, which typically would exert downward pressure on gold prices. Even the optimism surrounding a potential delay in the enforcement of President Trump's reciprocal tariffs and discussions aimed at resolving the Russia-Ukraine conflict do little to dampen the prevailing bullish sentiment. This indicates that the most likely trajectory for the XAU/USD is upward, supporting the potential for further appreciation in the near term.

US President Donald Trump issued a warning on Friday, indicating that tariffs on automobiles are expected to be implemented by April 2. This announcement adds to Trump's plans for reciprocal tariffs against nations that impose duties on American imports, further supporting the demand for safe-haven Gold.

The release of disappointing US Retail Sales data on Friday, coupled with mixed signals regarding inflation, implies that the Federal Reserve may consider a rate cut during its policy meetings in September or October. Fed Funds Futures indicate a potential 40 basis point reduction in 2025.

On Monday, Philadelphia Fed President Patrick Harker stated that the labor market is generally balanced and that the current economic conditions warrant a steady policy approach, given the persistent nature of inflation in recent months. Harker emphasized that future decisions regarding Fed rate policy will be guided by data.

Fed Board of Governors member Michelle Bowman remarked that elevated asset prices may have hindered progress on inflation, asserting that more certainty regarding declining inflation is necessary before any rate reductions can be considered. She noted that wage growth above the target level aligns with the Fed's inflation objectives.

Fed Board of Governors member Christopher Waller commented that the progress made on inflation last year has been painfully slow, suggesting that rate cuts could be warranted in 2025 if inflation trends mirror those of 2024. Waller anticipates a continuation of disinflation and interest rate reductions on a year-over-year basis.

Key Observations:

1. Support Level:

   • The ascending trendline provides dynamic support, currently around $2,880 - $2,890.
   • If this trendline breaks, the next support could be $2,850 - $2,860.

2. Resistance Levels:

   • The recent local high around $2,940 - $2,950 acts as the first resistance.
   • If the price breaks above this, the next target could be around $2,980 - $3,000.

Possible Targets:

• Bullish Scenario: If price holds above the trendline and breaks resistance at $2,940 - $2,950, the next target could be $2,980 - $3,000.
• Bearish Scenario: If price breaks below $2,880, it may retest $2,850 - $2,860.