Gold price bulls have the upper hand near $2,900 amid trade war fears and weaker USD
- Gold regained positive traction on Monday amid sustained USD weakness.
- Concerns about Trump’s tariffs further benefit the safe-haven XAU/USD pair.
- The fundamental and technical setup underpin prospects for additional gains.
Gold price (XAU/USD) sticks to its intraday gains near the $2,900 mark through the early European session on Monday, though it remains confined in a range below the all-time peak touched last week. The US Dollar (USD) languishes near its lowest level since December 17 touched in reaction to the dismal US Retail Sales data on Friday. This, along with worries that US President Donald Trump’s tariffs could trigger a global trade war, turn out to be key factors acting as a tailwind for the safe-haven bullion.
Meanwhile, the growing market acceptance that the Federal Reserve (Fed) would stick to its hawkish stance and keep interest rates on hold for an extended period helps limit the downside for the USD. Apart from this, the optimism over talks between the US and Russia aimed at ending the war in Ukraine, along with a generally positive risk tone, caps the Gold price. The near-term bias, however, remains tilted in favor of bulls and supports prospects for a further appreciating move for the XAU/USD pair.
Gold price attracts haven flows amid worries about Trump’s reciprocal tariffs, weaker USD
- The US Dollar languishes near its lowest level since December 17 touched in reaction to disappointing US Retail Sales data on Friday and helps revive demand for the Gold price.
- The US Census Bureau reported that Retail Sales declined by 0.9% in January, worse than the decrease of 0.1% expected and the 0.7% increase (revised from 0.4%) in December.
- The markets were quick to react and are now pricing in a rate cut by the Federal Reserve in September, rather than at the end of the year, further benefiting the precious metal.
- Kevin Hassett, Director of the US National Economic Council (NEC) said that a 40 basis points drop in 10-year US Treasury yield could be a sign the market expects lower inflation.
- US President Donald Trump ordered officials to formulate plans for reciprocal tariffs on countries that impose taxes on US imports, though he stopped short of announcing levies.
- Adding to this, Trump threatened that levies on automobiles would be coming as soon as April 2, fueling concerns about a global trade war and underpinning the XAU/USD.
- With US and Russian officials expected to hold talks in Saudi Arabia, Russian troops step up their attacks in eastern Ukraine, further boosting demand for the safe-haven commodity.
Gold price needs to move back above $2,925 barrier for bulls to retain near-term control
From a technical perspective, the Relative Strength Index (RSI) on the daily chart has eased from overbought territory, while other oscillators retain their positive bias. This, in turn, validates the near-term constructive outlook for the Gold price and supports prospects for a further appreciating move. That said, any subsequent strength might face a barrier near the $2,925 horizontal zone ahead of the all-time peak, around the $2,942-2,943 region. Some follow-through buying beyond the latter would be seen as a fresh trigger for bulls and pave the way for an extension of the recent well-established uptrend witnessed over the past two months or so.
On the flip side, the $2,885 region could offer immediate support ahead of last week’s swing low, around the $2,855 zone. Any further decline could be seen as a buying opportunity near the $2,834 area, which, in turn, should help limit the downside for the Gold price near the $2,815 region. This is followed by the $2,800 mark and the $2,785-2,784 support, which if broken decisively would set the stage for a meaningful corrective fall.
