Gold prices (XAU/USD) have managed to recover some of their losses after dipping to a one-week low in the previous session. The yellow metal found some support amidst ongoing concerns surrounding the U.S. trade war, particularly President Donald Trump’s tariff plans, which continue to raise uncertainty in global markets. As a traditional safe-haven asset, gold benefits from such instability.
However, analysts caution that the broader impact of Trump’s tariff actions could fuel inflation fears at the U.S. Federal Reserve. This might prompt the central bank to maintain a higher interest rate environment for an extended period, potentially limiting the upside for gold. Higher interest rates diminish the appeal of non-yielding assets like gold, which could cap its price growth.
Market participants are also eyeing key U.S. economic data. New Home Sales for January will be released later on Wednesday, while Federal Reserve officials Raphael Bostic and Thomas Barkin are scheduled to speak on the same day. Friday’s highly anticipated release of the U.S. Personal Consumption Expenditures (PCE) Price Index for January will be another critical indicator for market sentiment.
Trade War Concerns Boost Gold as Safe-Haven Asset
Gold prices gained momentum late Tuesday after Trump signed an executive order instructing the U.S. Commerce Department to investigate copper markets. Trump also reaffirmed that tariffs on Canadian and Mexican imports were “on time and on schedule,” despite efforts by both countries to address border security and curb the flow of fentanyl into the U.S., ahead of the March 4 deadline.
U.S. consumer confidence took a sharp hit in February, falling to 98.3 from 105.3 in January, marking its biggest drop since August 2021, according to the Conference Board. This decline in consumer sentiment adds to the uncertainty, further supporting gold’s safe-haven status.
Richmond Fed President Thomas Barkin stated he would take a “wait-and-see” approach on interest rate policy until inflation shows signs of returning to the Fed’s 2% target. Meanwhile, Dallas Fed President Lorie Logan suggested that it might be appropriate for the Fed to buy more short-term securities to align its portfolio with Treasury issuance.
Gold Price Outlook: Bullish Tone Maintained Despite Short-Term Consolidation
On the technical side, gold prices are holding a bullish tone, although they are currently consolidating within a narrow trading range. The price remains above the key 100-day Exponential Moving Average (EMA), indicating that the longer-term outlook remains positive. Additionally, the 14-day Relative Strength Index (RSI) is comfortably above the midline at 64.0, suggesting that the path of least resistance is still to the upside.
However, gold faces significant resistance near its all-time high of $2,957, a level that has proven difficult for bulls to break through. If gold can manage to surpass this resistance, the next target could be $2,980, the upper boundary of the Bollinger Band, potentially leading to a psychological push toward the $3,000 level.
On the downside, the February 25 low at $2,888 represents initial support. A deeper pullback could push gold towards $2,795, the lower Bollinger Band, with the critical level to watch being $2,718, where the 100-day EMA resides.
In conclusion, while gold is benefiting from ongoing trade war fears and broader economic uncertainty, the prospect of higher interest rates remains a key limiting factor. As such, while the metal’s bullish outlook persists, market dynamics and Fed policy will likely continue to influence gold’s price action in the near term.
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