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- Gold price extends its consolidative price move in the weekly trading range.
- The Fed’s hawkish pause acts as a headwind for the non-yielding commodity.
- Sliding US bond yields keep the USD bulls on the defensive and lend support.
Gold price (XAU/USD) regains positive traction following the previous day’s two-way price move and trades near the top end of its weekly range, above the $2,765 level during the early part of the European session on Thursday. The uptick is sponsored by a fresh leg down in the US Treasury bond yields, which tends to underpin demand for the non-yielding yellow metal. Apart from this, concerns about the potential economic fallout from US President Donald Trump’s tariff plans further benefit the safe-haven commodity.
Furthermore, Trump’s demand for lower interest rates and signs of abating inflation in the US support the prospect for further policy easing by the Federal Reserve (Fed) and a further appreciating move for the Gold price. That said, the hawkish pause on Wednesday continues to underpin the US Dollar (USD), which, along with a positive risk tone, keeps a lid on the XAU/USD. Traders now look to the European Central Bank (ECB) decision for some impetus ahead of the release of the Advance US Q4 GDP print.
Gold price bulls have the upper hand amid trade war fears; sliding US bond yields
- The Federal Reserve held interest rates steady on Wednesday and signaled that there would be no rush to lower borrowing costs until inflation and jobs data made it appropriate.
- In the post-meeting press conference, Fed Chair Jerome Powell said that politics would not affect the central bank’s interest-rate calls and downplayed expectations for future rate cuts.
- Powell’s remarks reaffirmed the notion that rates will remain higher for longer amid caution over US President Donald Trump’s protectionist policies, which could reignite inflation.
- The yield on the benchmark 10-year US government bond struggles to build on the post-FOMC bounce from over a one-month low, capping the US Dollar and supporting the Gold price.
- Investors remain concerned about the potential economic fallout from Trump’s trade tariffs and protectionist policies, which further underpin the safe-haven precious metal.
- The highly-anticipated European Central Bank (ECB) monetary policy decision this Thursday could infuse some volatility in the markets and drive demand for the XAU/USD.
- The focus will then shift to the release of the closely-watched US Personal Consumption Expenditures (PCE) Price Index – the Fed’s preferred inflation gauge – on Friday.
Gold price could accelerate the positive move once the $2,772-2,773 hurdle is cleared
From a technical perspective, the recent breakout through the $2,720-2,725 horizontal barrier and positive oscillators on the daily chart validate the near-term positive outlook for the Gold price. That said, it will still be prudent to wait for a subsequent strength beyond the $2,772-2,773 immediate hurdle before positioning for a move towards the $2,786 area, or the highest level since October 2024 touched last Friday. The momentum could extend further towards the all-time peak, near the $2,790 zone. Some follow-through buying, leading to a move beyond the $2,800 mark, will be seen as a fresh trigger for bulls and pave the way for an extension of a well-established uptrend witnessed over the past month or so.
On the flip side, weakness below the overnight swing low, around the $2,745-2,744 area could be seen as a buying opportunity but limited near the $2,730 region, or the weekly trough touched on Monday. This is followed by the $2,725-2,750 resistance-turned-support, below which the Gold price could accelerate the fall towards the $2,707-2,705 area en route to the $2,684 support zone.
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.
