- Gold price attracts some sellers as a modest USD strength prompts some profit-taking.
- Fed rate cut bets should cap the US recovery and support the non-yielding yellow metal.
- Trade jitter and rising geopolitical tensions could further limit losses for the XAU/USD.
Gold price (XAU/USD) continues losing ground for the second straight day on Friday, though it managed to rebound slightly from the $3,020 area, or a three-day low touched during the early European session. The Federal Reserve’s (Fed) forecast for only two 25 basis points (bps) rate cuts by the end of this year assists the US Dollar (USD) in gaining positive traction for the third successive day, which, in turn, is seen undermining the commodity. Apart from this, the downtick could further be attributed to some profit-taking heading into the weekend.
However, bets that the Federal Reserve (Fed) will resume its rate-cutting cycle should cap the USD gains and act as a tailwind for the non-yielding Gold price. Furthermore, the uncertainty over US President Donald Trump’s aggressive trade policies and their impact on the global economic outlook, along with geopolitical risk, hold back traders from placing aggressive bearish bets around the safe-haven bullion. This, in turn, makes it prudent to wait for strong follow-through selling before confirming that the XAU/USD pair has topped out in the near term.
Daily Digest Market Movers: Gold price bulls turn cautious amid a goodish pickup in the USD demand
- The US Dollar attracts some buyers for the third straight day and looks to build on this week’s bounce from a multi-month low, exerting some downward pressure on the Gold price during the Asian session on Friday.
- Investors remain worried about US President Donald Trump’s threatened reciprocal tariffs, which he said will come into effect on April 2. This comes on top of a flat 25% duty on steel and aluminum since February.
- US Senator Steve Daines will visit China for trade talks – marking the first high-level political meeting since President Donald Trump’s return –to revive stalled trade negotiations amid rising tariff tensions.
- Both Russia and Ukraine stepped up aerial attacks on Thursday amid truce talks, with Ukraine striking Russia’s Engels airbase in the Saratov region with attack drones, causing a fire and explosions in the area.
- Furthermore, Ukraine’s air force said on Thursday that Russia had launched 171 drones over its territory. Meanwhile, Russian and US officials are scheduled to hold talks on Ukraine in Saudi Arabia on Monday.
- Israel resumed heavy strikes across Gaza on Tuesday, breaking the ceasefire with Hamas that was in place since late January. Moreover, Hamas fired three rockets at Israel on Thursday, without causing casualties.
- The Federal Reserve indicated that it would deliver two 25 basis points rate cuts by the end of this year and also revised down its growth outlook amid the uncertainty over the impact of Trump’s aggressive trade policies.
- Adding to this, Fed Chair Jerome Powell said that tariffs are likely to dampen economic growth. Investors now see the US central bank lowering borrowing costs at the June, July, and October monetary policy meetings.
- The prospects for further policy easing by the Fed might hold back the USD bulls from placing aggressive bets and act as a tailwind for the non-yielding yellow metal in the absence of any relevant US macro releases.
Gold price could accelerate the corrective pullback once the $3,020 support is broken decisively
From a technical perspective, the corrective slide witnessed over the past two days could be attributed to some profit-taking amid slightly overbought conditions on the daily chart. That said, the lack of any follow-through selling warrants some caution for bearish traders and before confirming that the Gold price has topped out in the near term. Hence, any further decline below the $3,023-3,022 area might still be seen as a buying opportunity and remain limited near the $3,000 psychological mark.
The latter should act as a key pivotal point for short-term traders, which if broken decisively might prompt some technical selling and drag the Gold price to the $2,980-2,978 intermediate support en route to the $2,956 area. The downward trajectory could extend further towards the $2,930 support before the XAU/USD drops to the $2,900 mark and aims towards testing last week’s swing low, around the $2.880 region.
On the flip side, the $3,057-3,058 zone, or the all-time peak touched on Thursday, now seems to act as an immediate hurdle. A sustained strength beyond will be seen as a fresh trigger for bullish traders and pave the way for an extension of the recent well-established uptrend witnessed over the past three months or so.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
