06 Mar 2025

Gold prices have retreated from a one-week peak in the context of a prevailing risk-on sentiment. Concerns regarding trade wars, speculation about potential Federal Reserve rate cuts, and a weakening US dollar may provide support for the commodity. Traders are likely to adopt a wait-and-see approach ahead of the important US Non-Farm Payroll (NFP) report scheduled for release on Friday.

During the initial half of the European trading session on Thursday, gold prices (XAU/USD) encountered selling pressure, although they managed to remain above the significant $2,900 mark. Recent concessions made by the US regarding trade tariffs with Canada and Mexico have enhanced investors' appetite for riskier assets, thereby diverting flows away from the traditionally safe-haven precious metal. Additionally, the intraday decline appears to lack any substantial fundamental drivers, suggesting that it may be limited in scope.

Investor concerns persist regarding US President Donald Trump's tariff policies and the escalating risk of a global trade conflict, which continue to support gold as a safe-haven asset. Moreover, the anticipation that Trump's policies could hinder US economic growth and compel the Federal Reserve to implement multiple interest rate cuts in 2025 is likely to mitigate the downside risks for gold. This situation calls for caution among bearish traders.

Daily Market Update: Gold Prices Decline as Positive Market Sentiment Erodes Safe-Haven Demand  
On Tuesday, the new 25% tariffs imposed by US President Donald Trump on a majority of imports from Mexico and Canada came into effect, alongside a significant increase in duties on Chinese goods, which rose to 20%.  
In response, Canada announced retaliatory tariffs affecting over $100 billion worth of US products, while China implemented tariffs of up to 15% on various US agricultural exports.  
During his inaugural address to Congress, Trump indicated that additional tariffs, including "reciprocal tariffs," would be introduced on April 2, heightening concerns of a potential trade war.  
Investors are apprehensive that these tariffs may hinder US economic growth and compel the Federal Reserve to implement multiple interest rate cuts by year-end.  
This sentiment was reinforced by the Automatic Data Processing (ADP) report, which revealed that private sector employment in the US increased by only 77,000 in February, significantly below the anticipated 140,000.  
Conversely, economic activity within the US service sector continued to grow at an accelerated rate in February, yet this did little to bolster the US Dollar.  
The USD Index (DXY) fell to its lowest point since December 2024, further supporting gold prices during the Asian trading session on Thursday.  
Additionally, the White House announced a one-month extension for US automakers to adhere to the US–Mexico–Canada Agreement concerning the tariffs on Mexico and Canada.  
This development has increased investors' interest in riskier assets, thereby discouraging aggressive bullish positions on the safe-haven XAU/USD pair.  
Market participants are now awaiting the upcoming Weekly Initial Jobless Claims data from the US for further direction, while the primary focus remains on the US Nonfarm Payrolls report scheduled for Friday.

From a technical standpoint, surpassing the immediate resistance level of $2,934 could enable the Gold price to approach its all-time high, approximately $2,956, which was reached in February. An increase in buying activity would likely serve as a new catalyst for bullish traders, facilitating the continuation of a multi-month uptrend observed alongside favorable oscillators on the daily chart.

However, the absence of sustained buying necessitates a degree of caution before making any further investment decisions. Nevertheless, any potential decline may be perceived as a buying opportunity near the $2,900 level, with losses expected to be limited. Conversely, a significant increase in selling pressure could lead to more substantial declines towards the intermediate support levels of $2,884-2,883, ultimately targeting the horizontal support range of $2,860-2,858.