12 Mar 2025

Gold prices are currently facing challenges in sustaining the upward momentum observed overnight, although the potential for a decline appears limited. A slight rebound in the US dollar from a multi-month low, coupled with a generally positive market sentiment, is restraining the precious metal's performance. Concerns regarding trade tensions and expectations of interest rate cuts by the Federal Reserve are providing support to the XAU/USD pair as the market anticipates the upcoming US Consumer Price Index (CPI) report.

Throughout the initial part of the European session on Wednesday, the price of gold (XAU/USD) has remained within a narrow range close to the weekly high, as traders await a new catalyst to prompt a significant directional movement. The impending release of the critical US CPI data is expected to have a substantial impact on the Federal Reserve's approach to interest rate adjustments, which will, in turn, influence the demand for the US dollar and potentially offer significant support to the non-yielding yellow metal.

Simultaneously, market participants are factoring in the likelihood of multiple interest rate cuts by the Federal Reserve this year, driven by concerns over a slowdown in the US economy due to tariffs and indications of a weakening labor market. These factors, along with ongoing apprehensions regarding President Donald Trump, global trade disputes, and their repercussions on the global economy, continue to bolster gold prices as a safe-haven asset. However, the absence of substantial buying activity suggests that cautiousness is warranted for those adopting an aggressively bullish stance.

Daily Digest Market Movers: Gold price traders are anticipating the US Consumer Price Index (CPI) before making new directional investments.

On Tuesday, US President Donald Trump escalated the trade conflict by announcing plans to double the proposed tariff increases on steel and aluminum imports from Canada to 50%, which significantly bolstered the safe-haven appeal of gold. However, he later reversed this stance following Ontario Premier Doug Ford's decision to suspend a 25% surcharge on electricity sold to the US.

In Congress, the lower house narrowly approved a Republican spending bill aimed at preventing a government shutdown on March 14, ensuring the US government remains operational until September. This development has further enhanced investor confidence. The bill is now set to be reviewed by the Senate, where it will require the backing of at least seven Democrats to surpass the 60-vote filibuster threshold before it can be sent to Trump for approval.

Ukraine has indicated its willingness to accept a US proposal for an immediate, interim 30-day ceasefire with Russia following discussions in Jeddah, Saudi Arabia. The US is expected to present this offer to Russia, which has yet to respond. This situation may contribute to a shift in global risk sentiment, potentially acting as a headwind for gold prices.

Over the weekend, Trump did not dismiss the possibility of a recession in the US and highlighted potential economic instability stemming from his policy initiatives. Coupled with indications of a slowing US labor market, this has led to speculation that the Federal Reserve may soon resume its cycle of interest rate cuts. Currently, traders are anticipating three rate cuts of 25 basis points each by the end of the year.

This scenario may limit any significant recovery of the US Dollar from its lowest point since mid-October reached on Tuesday, favoring bulls in the XAU/USD market. Nevertheless, traders may choose to remain cautious and await the important US Consumer Price Index (CPI) report, which could impact the Federal Reserve's rate-cutting strategy and provide substantial momentum for the non-yielding yellow metal.

Gold prices may seek to test the all-time high once the $2,928-2,930 resistance level is decisively surpassed.

From a technical standpoint, bullish investors may need to await a breakthrough past the $2,928-2,930 resistance before positioning themselves for additional gains. A subsequent upward movement could propel the Gold price closer to the all-time high of approximately $2,956, which was reached on February 24. Increased buying activity would serve as a new catalyst for bullish traders and facilitate the continuation of the recently established upward trend, supported by favorable oscillators on the daily chart.

Conversely, a decline below the $2,900 threshold may encounter support around the $2,880 level, or the weekly low. This would be followed by the $2,860 area, beneath which the Gold price could accelerate its decline towards the late February swing low, approximately in the $2,833-2,832 range, before potentially falling to the $2,800 level.