Gold Price Struggles to Maintain Momentum as USD Strengthens and Tariff Concerns Linger
The gold price has encountered resistance at the $3,020 per ounce level, with mixed economic data and the recent rebound of the US Dollar contributing to the current price action. Despite this, the gold market remains heavily influenced by geopolitical risks, particularly the looming trade policies from the US administration and inflation concerns. Gold (XAU/USD) continues to stay above the significant $3,000 support level, which has offered a cushion for the metal, but the upward momentum has slowed, as market participants wait for fresh catalysts to drive prices in either direction.
The latest data out of the US showed a solid increase in Durable Goods Orders, which rose by 0.9% month-over-month in February, defying expectations of a 1% decline. This solid data provided a boost to the US Dollar, which in turn pressured gold prices slightly lower. The dollar index (DXY) rose by 0.32% to 104.55, as traders reacted to the US President's announcement regarding automobile tariffs. While the tariffs may weigh on market sentiment, the resulting uncertainty is pushing investors towards gold, keeping the metal’s prices buoyed above key support levels.
For gold traders, the support at $3,000 remains critical. A breach of this level could signal further downside risks, potentially pushing the XAU/USD pair towards the $2,956 mark or even lower. However, the broader technical outlook still remains positive. Gold’s price action has stayed above important moving averages, and the Relative Strength Index (RSI) suggests that any near-term weakness may not translate into a major trend reversal.
Tariffs and the Fed’s Impact on Gold Prices
US President Donald Trump's recent tariff announcements, including plans for automobile tariffs, are adding to the uncertainty in the market. While some of these tariffs may be postponed or exempt certain countries, the mere suggestion of tariffs has created volatility in financial markets. Gold, typically seen as a safe-haven asset, has benefitted from the continued concerns over inflation and economic growth. With inflation remaining above the Federal Reserve's target, comments from Federal Reserve officials like St. Louis Fed President Alberto Mussalem and Minneapolis Fed President Neel Kashkari indicate that the central bank remains cautious about easing rates too quickly.
Despite these concerns, the Federal Reserve’s tone has remained relatively dovish, particularly in regards to future rate cuts. The market has priced in approximately 64.5 basis points of rate cuts in 2025, with many traders anticipating a rate reduction as early as June. This dovish outlook for US monetary policy is supportive for gold, as non-yielding assets like bullion tend to perform well in a low-interest-rate environment. The ongoing market uncertainty, coupled with speculation around future monetary policy, continues to offer support for gold prices.
Gold ETF Flows Indicate Strong Demand
Gold-backed exchange-traded funds (ETFs) have seen significant inflows, with 23 tonnes of gold added in a single day, marking the largest increase since 2022. This robust demand reflects growing investor interest in gold as a hedge against economic uncertainty. Year-to-date, gold ETFs have accumulated around 155 tonnes of gold, pushing total holdings to their highest level since September 2023. These inflows suggest that, despite the current consolidation in gold prices, there is strong underlying demand that may drive prices higher if the pace of investment continues.
XAU/USD Technical Outlook and Key Levels
From a technical perspective, the gold price remains in a bullish posture above the $3,000 mark. However, the failure to break above recent highs, particularly the $3,036 level, has left the market in a consolidation phase. A close above $3,036 would open the door for a push towards the all-time high of $3,057.21. On the other hand, a break below the $3,000 support could trigger a deeper pullback, with the next support levels at $2,982 and $2,956.
The RSI on the daily chart remains bullish but has flattened slightly, signaling that gold bulls may be losing steam temporarily. However, the support at $3,000 is holding firm, and as long as this level is maintained, the overall trend for gold remains positive. Additionally, the potential for further geopolitical tensions and inflation fears could continue to provide the necessary catalyst for gold to test higher levels.
Outlook for Gold Prices: Is $3,100 in Sight?
Looking ahead, gold’s price action will likely remain tied to developments in US economic data and global geopolitical events. The upcoming release of the US Personal Consumption Expenditures (PCE) Price Index, which is the Federal Reserve's preferred inflation gauge, could be a key catalyst for gold. A lower-than-expected PCE print could reinforce the dovish outlook for the Fed and support gold prices further. Additionally, any escalation in geopolitical tensions or uncertainty surrounding US trade policies could push more investors into gold, driving prices towards the next major resistance levels at $3,100 and beyond.
In conclusion, the outlook for gold (XAU/USD) remains bullish, supported by strong demand from ETFs and safe-haven flows, along with the ongoing concerns over inflation and US trade policies. The $3,000 level continues to act as a critical support zone, with the potential for further upside if geopolitical risks and inflationary pressures continue to drive investor sentiment towards gold. However, any significant pullback below $3,000 could trigger further downside, potentially revisiting levels near $2,956. For now, gold bulls remain hopeful that the metal will find further strength, but the market will remain volatile as traders await the next catalyst for movement.
