02 Apr 2025

On Wednesday, the price of gold attracted some dip-buyers, halting the overnight decline from its all-time high. Support for the safe-haven asset XAU/USD is provided by expectations of a Federal Reserve rate cut, weak demand for the US dollar, and escalating trade tensions. However, the recent increase lacks strong bullish momentum as traders await President Trump's forthcoming announcement regarding reciprocal tariffs.

During the first half of the European session on Wednesday, gold (XAU/USD) exhibited a positive trend, remaining near the record high reached the previous day. Investors are increasingly concerned about the implications of President Donald Trump's assertive trade policies on the global economy. Additionally, ongoing geopolitical tensions are significant factors bolstering demand for the safe-haven metal.

Moreover, the anticipation that the Federal Reserve will soon resume its rate-cutting measures in response to a tariff-induced slowdown in the US economy further supports the non-yielding gold price. This, combined with a lack of demand for the US dollar, contributes to the modest gains observed during the day. Nevertheless, XAU/USD bulls appear hesitant to make substantial investments ahead of Trump's announcement on reciprocal tariffs.

Daily Digest Market Movers: Gold Prices Draw Safe-Haven Demand Amid Trade Concerns

Investors are increasingly anxious about the potential economic repercussions of US President Donald Trump's trade policies, which have helped the safe-haven Gold price recover some ground after a recent decline from a new all-time high.

Recent macroeconomic data from the US indicates persistent inflation and a slowdown in economic growth, suggesting that the economy may be approaching stagflation. This scenario could compel the Federal Reserve to consider resuming its rate-cutting strategy in June.

These worries were exacerbated by the disappointing US ISM Manufacturing Purchasing Managers Index (PMI) released on Tuesday, which dropped from 50.3 to 49 in March, signaling a contraction in business activity for the first time in three months. The report also indicated that factory gate inflation surged to its highest level in nearly three years, while the Employment Index pointed to a significant decline in payrolls within the sector during the reported month.

Additionally, the Job Openings and Labor Turnover Survey (JOLTS) revealed that job openings on the last business day of February fell to 7.56 million, down from 7.76 million the previous month.

According to the CME Group's FedWatch Tool, the market is currently anticipating that the Fed may implement rate cuts totaling 80 basis points this year, which would weaken the US Dollar and further support the non-yielding yellow metal.

Asian equity markets mirrored the gains seen on Wall Street overnight, but overbought conditions may prevent XAU/USD bulls from making new investments ahead of Trump's forthcoming announcement on reciprocal tariffs.

Meanwhile, the upcoming release of the US ADP report on private-sector employment and Factory Orders data could impact the USD, potentially providing additional momentum for the precious metal during the early North American trading session.

From a technical standpoint, the recent pullback from the all-time high has halted around the $3,100 level, with the subsequent upward movement favoring bullish traders. However, the daily Relative Strength Index (RSI) is significantly above the 70 threshold, indicating overbought conditions. Therefore, it would be wise to wait for some short-term consolidation or a slight pullback before making any further investments for potential gains. Nonetheless, the overall positive setup implies that the most likely direction for Gold prices remains upward.

Currently, the $3,100 level may continue to provide support against immediate declines and serve as a crucial pivot point. A decisive drop below this level could trigger some long position liquidations, potentially pushing Gold prices down past the $3,076 mark, which corresponds to the weekly swing low observed on Monday, and towards the resistance area of $3,057-3,058. This downward movement could extend further to the support zone between $3,036 and $3,035, leading towards the psychological level of $3,000, which is expected to serve as a robust foundation for XAU/USD.