- Gold prices face challenges in building on the overnight recovery from a multi-day low.
- Rising US bond yields boost USD demand, putting pressure on the XAU/USD pair.
- Trade tariffs under Trump and expectations of Fed rate cuts may offer support to the precious metal.
Gold prices (XAU/USD) continue to trade in a sideways consolidation pattern during the first half of the European session on Tuesday, influenced by mixed fundamental signals. US President Donald Trump’s trade tariff threats have raised inflation concerns, leading to a modest recovery in US Treasury bond yields. This has strengthened the US Dollar (USD), rebounding from a more than one-month low, and exerted downward pressure on gold.
However, expectations that the Federal Reserve (Fed) will implement two rate cuts by the end of the year, driven by Trump’s call for lower rates, may limit the rise in bond yields and the USD. Additionally, concerns over the economic risks associated with Trump’s protectionist trade policies could provide some support for the safe-haven appeal of gold. Market participants may also remain cautious ahead of the two-day FOMC policy meeting starting later on Tuesday.
Gold price traders remain cautious amid mixed fundamental signals:
- US President Donald Trump directed his administration to impose emergency 25% tariffs on Colombian imports. However, the duties were postponed after Colombia agreed to accept all illegal migrants returned from the US.
- On Tuesday, Trump announced plans to impose tariffs on pharmaceutical and computer chip producers, along with potential tariffs on aluminum, copper, steel, and other industries. This has reignited fears of inflation and supported a rebound in the benchmark 10-year US Treasury yields from a one-month low, boosting the US Dollar and pressuring gold prices.
- Trump reiterated last week his demand for interest rate cuts. Markets are now anticipating two 25-basis-point rate cuts by the Federal Reserve by year-end, which could limit gains in US bond yields and the Greenback.
- Traders are eyeing Tuesday’s US economic data, including Durable Goods Orders, the Conference Board’s Consumer Confidence Index, and the Richmond Manufacturing Index, for short-term market direction during the North American session.
- Attention will shift to the key FOMC monetary policy decision on Wednesday, which is expected to significantly influence USD dynamics and guide the next directional move for the non-yielding gold price.
Gold price bulls remain hopeful as $2,725-$2,720 support holds firm
On Monday, XAU/USD displayed resilience below the 23.6% Fibonacci retracement level of its December-January rally. Daily chart oscillators remain in positive territory, reinforcing the bullish outlook. Additionally, the recent breakout above the $2,720-$2,725 horizontal barrier indicates that the may continue trending upward. For deeper losses to materialize, a decisive break below the overnight swing low near $2,730 and the $2,725-$2,750 resistance-turned-support zone is necessary. Such a move could push the price toward the $2,707-$2,705 range (38.2% Fibonacci level), and eventually the 50% Fibonacci level around $2,684.
On the upside, immediate resistance lies near the $2,755-$2,757 zone, followed by the overnight swing high around $2,772-$2,773. Beyond this, the $2,786 mark, which represents the October 2024 peak, and the all-time high near $2,790, serve as key hurdles. A sustained break above the $2,800 psychological level could signal fresh momentum for bullish traders, paving the way for further gains and extending the strong uptrend observed over the past month.
