20 Feb 2025

• Gold price retains its bullish bias amid worries about Trump’s tariffs and a global trade war.
• Sliding US bond yields weigh on the USD and lend additional support to the precious metal.
• The Fed’s hawkish outlook could cap the XAU/USD pair amid slightly overbought conditions.

Gold prices (XAU/USD) reached a new all-time high during the early European trading session on Thursday, confirming a breakout from a short-term trading range. The recent threat from US President Donald Trump to impose tariffs on imported goods has diminished investors' interest in riskier assets, thereby sustaining demand for the safe-haven metal. This global shift towards safety has led to a decline in US Treasury bond yields, which subsequently applies downward pressure on the US Dollar (USD) and provides additional support for gold.

In addition, the hawkish minutes from the Federal Open Market Committee (FOMC) meeting released on Wednesday have reinforced market expectations for a prolonged pause in interest rate adjustments by the Federal Reserve (Fed). This scenario could serve as a supportive factor for US bond yields and the Greenback, potentially limiting the upward movement of non-yielding gold prices. Moreover, slightly overbought conditions observed on the daily chart may deter traders from initiating new bullish positions in XAU/USD. Nonetheless, the underlying fundamentals continue to favor the potential for further appreciation.

US President Donald Trump announced on Wednesday his intention to impose significant tariffs on various products as early as next month, potentially heightening trade tensions and supporting the price of safe-haven gold.

US Commerce Secretary Howard Lutnick, in a Fox News interview, indicated that Trump's objective is to eliminate the Internal Revenue Service and shift the tax burden to external entities. Concurrently, Trump expressed optimism regarding the possibility of a new trade agreement with China.

The US Dollar is finding it challenging to build on the modest recovery it experienced over the past two days, particularly in light of a recent decline in US Treasury bond yields, which further bolsters the appeal of the precious metal.

Minutes from the Federal Open Market Committee's January policy meeting, released on Wednesday, highlighted a significant level of uncertainty, prompting the central bank to adopt a cautious stance regarding any potential interest rate reductions.

Fed Vice Chairman Philip Jefferson remarked on the robust performance of the US economy, noting a solid labor market and a decrease in inflation, although it remains above target. He cautioned that the journey back to the 2% inflation goal may be fraught with challenges.

Chicago Fed President Austan Goolsbee acknowledged that while inflation has diminished, it remains excessive, suggesting that interest rates could decrease further once inflation stabilizes. However, this perspective has not swayed USD bulls or impacted the non-yielding yellow metal.

On Thursday, the US economic calendar includes the usual Weekly Initial Jobless Claims and the Philly Fed Manufacturing Index. These reports, along with remarks from key FOMC members, may influence the USD and the XAU/USD pair.

Attention will then turn to the release of flash global PMIs on Friday, which are expected to offer new insights into global economic conditions and potentially provide significant momentum for the safe-haven commodity.

From a technical perspective, the daily Relative Strength Index (RSI) is holding above the 70 mark and warrants some caution for bullish traders. This, in turn, suggests that the Gold price is more likely to extend over a one-week-old range-bound price action. Nevertheless, the near-term bias remains tilted firmly in favor of bullish traders and suggests that the path of least resistance for the XAU/USD pair remains to the upside. A sustained strength beyond the $2,945-2,950 area will mark a fresh breakout through a short-term range and a consolidation phase. This would set the stage for an extension of a well-established uptrend witnessed over the past two months or so.

Meanwhile, any corrective pullback below the $2,928 immediate support could be seen as a buying opportunity near the $2,918 region, or the overnight swing low, and remain limited near the $2,900 mark. This is followed by the $2,880 horizontal support, which if broken decisively could drag the Gold price to the $2,860-2,855 area en route to the $2,834 zone. Some follow-through selling should pave the way for a fall toward the $2,815 region before the XAU/USD pair eventually drops to the $2,800 mark and the next relevant support near the $2,785-2,784 area.