04 Mar 2025

Gold prices experienced a slight decline on Tuesday, influenced by expectations that the Federal Reserve may maintain elevated interest rates for an extended period. A modest increase in the US Dollar has also contributed to the subdued sentiment surrounding XAU/USD. Concerns regarding tariffs and the potential for a global trade conflict may provide some support for the safe-haven asset.

As the European session approaches on Tuesday, gold prices (XAU/USD) continue to exhibit a negative trend, remaining below the $2,900 threshold. However, there is a lack of significant selling pressure, despite escalating trade tensions. The US Dollar has attracted some buyers, driven by the anticipation that President Donald Trump's trade tariffs could reignite inflationary pressures, compelling the Federal Reserve to sustain higher interest rates for a longer duration. This scenario is perceived as a significant factor that undermines the appeal of the non-yielding yellow metal.

Additionally, apprehensions regarding the economic repercussions of Trump's protectionist measures, the possibility of a global trade war, and geopolitical uncertainties are dampening investors' enthusiasm for riskier assets. This is reflected in the generally weaker performance of equity markets, which may lend some support to gold prices. Traders appear to be exercising caution, opting to await the release of the US Nonfarm Payrolls (NFP) report on Friday before making new directional investments in XAU/USD.

Investors continue to express concerns that the trade tariffs imposed by US President Donald Trump may exacerbate price pressures, thereby enabling the Federal Reserve to maintain its hawkish approach. This sentiment has led to some selling activity in the gold market on Tuesday.

Effective today, Trump's tariffs on Mexico and Canada are being implemented, alongside a new 10% tax on Chinese imports. Additionally, Trump announced that reciprocal tariffs would commence on April 2 for countries that impose duties on US goods.

In response, Canada has confirmed its intention to impose retaliatory tariffs on US imports, while China's Commerce Ministry declared on Tuesday that it would introduce additional tariffs of up to 15% on key agricultural products imported from the US.

These developments heighten the risk of a global trade conflict, negatively impacting investor sentiment. This situation could potentially serve as a supportive factor for the safe-haven precious metal, helping to mitigate any significant declines in the context of a bearish outlook for the US Dollar.

The Institute for Supply Management's (ISM) Manufacturing PMI fell to 50.3 in February, down from 50.9 the previous month, while the Prices Paid Index surged to its highest level in nearly three years, reflecting concerns over import duties.

These factors compound worries that Trump's trade tariffs may hinder consumer spending and raise apprehensions regarding the future of the world's largest economy, which could further bolster the XAU/USD pair.

The recent meeting between Ukrainian President Volodymyr Zelenskiy and Trump concluded unfavorably on Friday. Moreover, a White House official has confirmed that the US has suspended military aid to Ukraine, adding to market uncertainties.

Attention will remain fixed on the upcoming release of the US monthly employment figures, commonly referred to as the Nonfarm Payrolls (NFP) report, scheduled for Friday. This critical data is expected to have a significant impact on both the USD and gold prices.

Key Levels:

• Resistance: $2,945
• Support: $2,825 (nearest key support)
• Current Price: $2,887.71 (Sell) / $2,887.78 (Buy)

Potential Trade Setup:

• Entry: If price breaks above $2,945, it may indicate further bullish momentum.
• Take Profit (TP):
  • TP1: $2,985 (short-term resistance)
  • TP2: $3,025 (next major psychological level)
• Stop Loss (SL): Below the recent swing low, around $2,825.

RSI Analysis:

• RSI is around 38.56, indicating near oversold conditions, meaning a potential rebound.

Trading Strategy:

• For Long Position: If price holds above $2,887, a bounce to $2,945 and beyond is possible.
• For Short Position: If price rejects $2,945, a retracement toward $2,825 is likely.