- Gold regained positive traction on Monday amid sustained USD weakness.
- Concerns about Trump’s tariffs further benefit the safe-haven XAU/USD pair.
- The fundamental and technical setup underpin prospects for additional gains.
Gold price (XAU/USD) maintains its bid tone around the $2,900 round-figure mark through the first half of the European session on Monday, though it lacks follow-through and remains below the all-time peak touched last week. Investors remain worried that US President Donald Trump's tariffs could trigger a global trade war. This turns out to be a key factor that continues to benefit the safe-haven bullion.
Meanwhile, the growing market acceptance that the Federal Reserve (Fed) would stick to its hawkish stance and keep interest rates on hold for an extended period helps revive the US Dollar (USD) demand. Moreover, the optimism over talks between the US and Russia aimed at ending the war in Ukraine, along with a positive risk tone, keeps a lid on any further appreciating move for the Gold price.
Gold price bulls turn cautious amid the emergence of some USD dip-buying, positive risk tone
- The US Dollar languishes near its lowest level since December 17 touched in reaction to disappointing US Retail Sales data on Friday and helps revive demand for the Gold price.
- The US Census Bureau reported that Retail Sales declined by 0.9% in January, worse than the decrease of 0.1% expected and the 0.7% increase (revised from 0.4%) in December.
- The markets were quick to react and are now pricing in a rate cut by the Federal Reserve in September, rather than at the end of the year, further benefiting the precious metal.
- Kevin Hassett, Director of the US National Economic Council (NEC) said that a 40 basis points drop in 10-year US Treasury yield could be a sign the market expects lower inflation.
- US President Donald Trump ordered officials to formulate plans for reciprocal tariffs on countries that impose taxes on US imports, though he stopped short of announcing levies.
- Adding to this, Trump threatened that levies on automobiles would be coming as soon as April 2, fueling concerns about a global trade war and underpinning the XAU/USD.
- With US and Russian officials expected to hold talks in Saudi Arabia, Russian troops step up their attacks in eastern Ukraine, further boosting demand for the safe-haven commodity.
Gold price might face stiff resistance near $2,925 ahead of the record high set last week
From a technical perspective, the Relative Strength Index (RSI) on the daily chart has eased from overbought territory, while other oscillators retain their positive bias. This, in turn, validates the near-term constructive outlook for the Gold price and supports prospects for a further appreciating move. That said, any subsequent strength might face a barrier near the $2,925 horizontal zone ahead of the all-time peak, around the $2,942-2,943 region. Some follow-through buying beyond the latter would be seen as a fresh trigger for bulls and pave the way for an extension of the recent well-established uptrend witnessed over the past two months or so.
On the flip side, the $2,885 region could offer immediate support ahead of last week's swing low, around the $2,855 zone. Any further decline could be seen as a buying opportunity near the $2,834 area, which, in turn, should help limit the downside for the Gold price near the $2,815 region. This is followed by the $2,800 mark and the $2,785-2,784 support, which if broken decisively would set the stage for a meaningful corrective fall.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays defensive below 1.0500 amid light trading
EUR/USD struggles to capitalize on recent upside and oscillates in a narrow range below 1.0500 in European trading on Monday. However, the pair's downside remains cushioned by persistent US Dollar weakness and an upbeat mood. Focus shifts to central bank talks.
GBP/USD ranges near 1.2600 as US Dollar steadies
GBP/USD keeps its range near 1.2600 in the early European session on Monday. The pair stays support amid a subdued US Dollar price action following Friday's disappoining US Retail Sales data. Thin trading is likely to extend as US markets are closed in observance of Presidents' Day.
Gold: Bulls have the upper hand near $2,900 amid trade war fears and weaker USD
Gold regained positive traction on Monday amid sustained USD weakness. Concerns about Trump’s tariffs further benefit the safe-haven XAU/USD pair. The fundamental and technical setup underpin prospects for additional gains.
Cardano set for 20% rally as bullish bets increase
Cardano price extends its rally on Monday after gaining more than 13% last week. On-chain metrics suggest a bullish picture as ADA’s long-to-short ratio reached the highest level in over a month.
Tariffs likely to impart a modest stagflationary hit to the economy this year
The economic policies of the Trump administration are starting to take shape. President Trump has already announced the imposition of tariffs on some of America's trading partners, and we assume there will be more levies, which will be matched by foreign retaliation, in the coming quarters.
The Best Brokers of the Year
SPONSORED Explore top-quality choices worldwide and locally. Compare key features like spreads, leverage, and platforms. Find the right broker for your needs, whether trading CFDs, Forex pairs like EUR/USD, or commodities like Gold.