Gold price (XAU/USD) sticks to positive bias for the third successive day on Wednesday and trades near its highest level since November 1 during the first half of the European session. The uncertainty around US President Donald Trump’s trade policies turns out to be a key factor that continues to drive haven flows towards the precious metal. Apart from this, expectations that the Federal Reserve (Fed) will cut rates twice this year lend additional support to the non-yielding yellow metal.
That said, the upbeat market mood, along with rebounding US Treasury bond yields and a modest US Dollar (USD) recovery from a two-week low, acts as a headwind for the Gold price. Nevertheless, the fundamental backdrop seems tilted firmly in favor of bullish traders and supports prospects for an extension of the XAU/USD positive move witnessed over the past month or so. Hence, any meaningful corrective slide might still be seen as a buying opportunity and is likely to remain limited.
Gold price bulls have the upper hand amid trade war fears; modest uptick in US bond yields and USD cap gains
Hours after taking the oath, US President Donald Trump said that he intends to impose 25% tariffs on Canada and Mexico, and the target date for tariffs would be as soon as early February.
Trump’s tariff remarks sparked concerns about a fresh wave of global trade war, boosting demand for safe-haven assets and lifting the Gold price to its highest level since early November.
Signs of abating inflation in the US revived bets that the Federal Reserve may not exclude the possibility of rate cuts by the end of this year, which dragged the US Treasury bond yields lower.
This, along with the Israel-Hamas ceasefire agreement, and hopes that Trump might relax curbs on Russia in exchange for a deal to end the Ukraine war, remain supportive of the risk-on mood.
The US Dollar gains some positive traction during the Asian session on Wednesday and moves away from a two-week trough that was retested on Tuesday, which might cap gains for the XAU/USD.
Investors now look forward to the highly-anticipated Bank of Japan decision on Friday, which could infuse volatility in the financial markets and influence the safe-haven precious metal.
Apart from this, the flash PMI prints would offer a fresh insight into the global economic health and provide some meaningful impetus to the commodity during the latter half of the week.
Gold price seems poised to build on the overnight breakout momentum above the $2,720 strong resistane
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From a technical perspective, the overnight breakout through the $2,720 supply zone was seen as a fresh trigger for bullish traders. Given that oscillators on the daily chart are holding comfortably in positive territory and are still away from being in the overbought zone, a subsequent strength beyond the $2,748-2,750 hurdle should pave the way for additional gains. The Gold price might then aim towards challenging the all-time peak, around the $2,790 area touched in October 2024.
On the flip side, any corrective pullback might now be seen as a buying opportunity and remain limited near the $2,725-2,720 region. The next relevant support is pegged near the $2,700-2,690 area, which if broken decisively might prompt aggressive technical selling and drag the Gold price to the $2,660 zone en route to the $2,625 confluence. The latter comprises the 100-day Exponential Moving Average (EMA) and an ascending trend-line extending from the November swing low, which, in turn, should act as a key pivotal point and help determine the next leg of a directional move for the XAU/USD.
Source: Fxstreet
