- Gold prices saw modest gains on Monday, supported by a weaker US Dollar.
- Expectations of further Fed rate cuts pressured the USD, boosting the XAU/USD pair.
- Concerns over Trump’s tariff plans and a potential global trade war further bolstered demand for the metal.
Gold price (XAU/USD) starts the week on a positive note, extending its recovery from Friday’s three-week low near the $2,833-2,832 region. Despite US inflation data aligning with expectations, traders continue to anticipate two quarter-point rate cuts by the Federal Reserve (Fed) before year-end. This dovish outlook, coupled with renewed selling pressure on the US Dollar (USD), supports the non-yielding yellow metal.
Additionally, concerns over the economic impact of US President Donald Trump’s tariff plans and rising geopolitical risks further bolster demand for gold as a safe-haven asset. However, the absence of strong follow-through buying suggests caution, as it remains uncertain whether XAU/USD’s recent corrective pullback from its record high has ended. Traders may also prefer to wait for key US macroeconomic data releases at the start of the new month before making decisive moves.
Gold price supported by Fed rate cut bets and a weaker USD
- Gold prices remain buoyed by expectations of further Federal Reserve rate cuts and a softening US Dollar. On Friday, the US Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index rose 0.3% in January and increased 2.5% year-over-year, slightly easing from 2.6% in December. Meanwhile, the core PCE Price Index, which excludes food and energy, climbed 0.3% last month and 2.6% annually, marking a notable slowdown from December’s 2.9%.
- Adding to concerns, US consumer spending unexpectedly declined by 0.2% in January, the first drop since March 2023 and the steepest fall in nearly four years, raising fears about economic growth. According to the CME Group’s FedWatch Tool, traders now anticipate the Federal Reserve will begin cutting interest rates at its June policy meeting, with another reduction expected in September.
- Beyond monetary policy, worries over US President Donald Trump’s trade tariffs further weigh on market sentiment. Trump confirmed plans to impose tariffs on Canada and Mexico starting Tuesday while also announcing a move to double the 10% universal tariff on imports from China. The escalation of trade tensions increases the risk of a global trade war, boosting demand for safe-haven gold.
- Looking ahead, traders will closely monitor the US ISM Manufacturing PMI later on Monday for fresh market cues. Additionally, key macroeconomic releases, including Friday’s Nonfarm Payrolls report, will likely influence the near-term trajectory of the US Dollar and, in turn, gold prices.
Gold price technical outlook signals caution before fresh bullish positions
From a technical standpoint, last week’s drop below the 23.6% Fibonacci retracement level of the December-February rally acted as a key trigger for sellers. Additionally, daily chart oscillators have started gaining negative momentum, reinforcing the likelihood of a continued corrective pullback from the all-time high.
As a result, any attempted recovery may still face selling pressure, with resistance expected near the $2,885 region. A break above this level could see gold testing the $2,900 mark, followed by the $2,934 intermediate hurdle on its way to the record high of approximately $2,956.
Conversely, Friday’s swing low around the $2,833-$2,832 zone now serves as immediate support. A break below this level could push gold toward the 38.2% Fibonacci retracement level near $2,815-$2,810. Further selling pressure below the $2,800 threshold would indicate a potential market top, opening the door for deeper declines.
