Gold prices (XAU/USD) have slightly retreated after reaching their highest level since November 6 during the early European session on Tuesday, hovering just below the $2,725 mark. Despite this minor pullback, the precious metal remains up over 0.50% for the day. The US Dollar (USD) is experiencing a recovery from a two-week low hit on Monday, bolstered by expectations that US President Donald Trump’s protectionist policies will spur inflation, pushing the Federal Reserve (Fed) to maintain its hawkish stance. Alongside a positive market sentiment towards equities, these factors are acting as headwinds for gold, traditionally seen as a safe-haven asset.
President Trump’s tariff remarks have reignited fears of a global trade war, further compounding the uncertainty. Additionally, the growing expectations that the Fed could cut interest rates twice this year, which have contributed to a recent sharp decline in US Treasury bond yields, may limit any substantial correction in gold prices. Despite these challenges, gold continues to show a positive bias for the second consecutive day, with the overall market conditions suggesting an upward trajectory for the commodity in the absence of significant economic data from the US.
Technical Outlook for Gold
From a technical standpoint, gold appears to have established solid support above the $2,720 resistance zone. The daily chart oscillators have been gaining positive momentum and are not yet in overbought territory, which supports bullish sentiment and indicates that the path of least resistance for XAU/USD is likely to remain upward. This could lead to further strength toward the next significant resistance level near $2,735, with the possibility of testing the $2,746-$2,748 region. Should this momentum continue, gold might challenge its all-time high of $2,790, a level reached in October 2024.
On the downside, any potential corrective pullback is likely to find support around the $2,700 mark. A break below the recent low of $2,689 could trigger technical selling, driving gold toward the $2,662-$2,660 range. Further downside movement could bring the price to the $2,635 level, followed by the $2,622-$2,618 zone, which represents a key confluence of a short-term ascending trend line from November’s low and the 100-day Exponential Moving Average (EMA).
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