07 Apr 2025

Gold prices have rebounded from a decline during the Asian session, which had brought them to a three-week low, although this recovery lacks momentum. Ongoing concerns about a potential recession continue to impact investor sentiment, thereby benefiting this safe-haven asset. Expectations for more aggressive interest rate cuts by the Federal Reserve are putting pressure on the US dollar, which in turn supports the XAU/USD pair.

Currently, gold (XAU/USD) is finding it challenging to build on its modest intraday recovery from the $2,972-2,971 range, a level that marks a nearly four-week low reached earlier today. As the European session approaches, the metal is experiencing slight intraday losses. Recent data revealed that the People's Bank of China (PBOC) has increased its gold reserves for the fifth consecutive month. Additionally, the prevailing risk-averse sentiment, driven by recession concerns and geopolitical tensions, provides further support for the commodity.

At the same time, the US dollar begins the week on a weaker footing, as speculation grows that a slowdown in the US economy, exacerbated by tariffs, may compel the Federal Reserve to resume its cycle of rate cuts. This risk-averse environment has also led to a significant drop in US Treasury bond yields, overshadowing the positive US Nonfarm Payrolls (NFP) report from Friday and the hawkish comments from Fed Chair Jerome Powell. This situation further bolsters the appeal of gold, which does not yield interest.

The intraday rebound, however, does not exhibit sustained momentum as investors persist in liquidating their bullish positions in XAU/USD to offset losses stemming from a widespread sell-off in global financial markets. Consequently, this situation necessitates a degree of caution before concluding that the recent significant corrective decline from last week's all-time high has fully played out, and before making any strategic moves for a substantial intraday increase.

Daily Digest Market Movers: Gold Price Bulls Show Hesitance Amid Tariff-Induced Global Turmoil

The escalating global trade conflict continues to raise fears of an impending economic recession, resulting in a prolonged sell-off in equity markets worldwide. Consequently, traders are opting to liquidate their long positions in gold to generate cash for offsetting losses in other areas.

Recent data released on Monday indicates that the People's Bank of China (PBOC) has increased its gold reserves for the fifth consecutive month in March. Specifically, the PBOC's holdings rose by 0.09 million troy ounces last month, reflecting the ongoing global trade tensions and geopolitical instability.

Last Wednesday, US President Donald Trump enacted reciprocal tariffs of at least 10% on all imported goods, with China facing a staggering 54% under this new policy. In retaliation, China's Commerce Ministry announced on Friday that it would impose additional tariffs of 34% on all imports from the United States.

Additionally, US Commerce Secretary Howard Lutnick confirmed on Sunday that these tariffs would not be delayed and would remain effective for the foreseeable future. Trump further emphasized that no agreement with China would be reached unless the trade deficit is addressed.

The US Dollar is struggling to build on Friday's modest recovery from a multi-month low, which followed the release of a stronger-than-expected US Nonfarm Payrolls (NFP) report. The data revealed that the economy added 228,000 jobs in March, compared to the previous figure of 117,000.

Meanwhile, Federal Reserve Chair Jerome Powell noted that inflation is nearing the target but remains slightly elevated. He cautioned that Trump's tariffs could exert significant inflationary pressure, and the Fed's responsibility is to prevent temporary price increases from evolving into sustained inflation.

Despite this, investors are still factoring in the likelihood that the US central bank will resume its rate-cutting cycle in June, with expectations of at least four reductions in borrowing costs throughout the year. This, combined with a risk-averse sentiment, continues to influence market dynamics.

From a technical standpoint, the significant decline observed last week from the all-time high has paused just before reaching the 61.8% Fibonacci retracement level associated with the strong upward movement from February to April. However, the subsequent upward movement struggles near the $3,055 horizontal support level, which has now become resistance. This level is expected to serve as a crucial pivot point for intraday traders; if the Gold price surpasses it, there is potential for an increase towards the $3,080 range, ultimately aiming for the $3,100 milestone.

Conversely, the psychological threshold of $3,000, aligning with the 50% retracement level, appears to safeguard the immediate downside, preceding the $2,972-2,971 zone, which represents the multi-week low reached earlier this Monday. This is closely followed by the 50-day Simple Moving Average (SMA) situated around the $2,946 mark. A decisive breach of this level could alter the near-term sentiment in favor of bearish traders, potentially leading to further declines.