Gold prices pause near multi-month highs as positive risk sentiment prevails

Gold prices (XAU/USD) enter a phase of bullish consolidation during the early European session, trading in a range above the $2,770 mark, just below the multi-month high reached earlier on Friday. The US Dollar (USD) continues to face selling pressure for the second consecutive day, sliding to a one-month low as US Treasury bond yields decline. This decline is fueled by comments from President Donald Trump suggesting a potential trade deal with China. Additionally, market expectations of further interest rate cuts by the Federal Reserve (Fed) later this year provide support for the non-yielding precious metal.

Concerns over the economic impact of Trump’s protectionist policies further drive demand for the safe-haven asset. However, a broadly positive sentiment in equity markets and slightly overbought technical conditions on short-term charts limit fresh bullish bets on XAU/USD. Despite this, gold remains poised to post gains for the fourth consecutive week. Traders now await the release of the flash US PMI data during the early North American session for additional short-term trading cues as the week concludes.

Gold prices remain supported by expectations of Fed rate cuts and a weaker US Dollar:

• Concerns about the economic impact of President Donald Trump’s tariffs continue to drive demand for the safe-haven metal on Friday.
• The US Dollar edges closer to its monthly low after Trump stated on Thursday that he plans to pressure the Federal Reserve to lower interest rates.
• Markets are increasingly pricing in the likelihood of two Fed rate cuts by year-end, amid signs of easing inflationary pressures in the US.
• On Friday, Trump described his conversation with Chinese President Xi Jinping as friendly, expressing optimism about reaching a trade deal with China and indicating a preference to avoid tariffs.
• This has reduced fears of inflation driven by Trump’s protectionist policies, further bolstering the case for Fed policy easing, which benefits the non-yielding gold market.
• Attention now shifts to the release of flash PMI data, which may offer fresh insights into the global economic outlook and influence broader market sentiment, impacting XAU/USD movements.

Gold price consolidates as RSI nears overbought levels; bullish outlook intact

From a technical standpoint, Thursday’s dip-buying and subsequent upward movement confirm a bullish breakout above the $2,720-$2,725 resistance zone. However, with the Relative Strength Index (RSI) on the daily chart approaching overbought territory, a short-term consolidation or modest pullback may be prudent before anticipating further gains. Any sustained momentum is likely to face strong resistance near the all-time high of $2,790.

On the downside, immediate support is located around the $2,760-$2,758 zone. A break below this level could push the Gold price towards the overnight low of $2,736-$2,735. Any further decline is expected to attract buying interest and remain contained near the $2,725-$2,720 area, now acting as a critical support level. A decisive break below this pivot point could shift the bias towards bearish trades and open the door for more significant losses.