Gold price hits fresh record high as a combination of factors continues to boost safe-haven demand.
The Fed’s dovish outlook keeps the USD bulls on the defensive and further underpins the XAU/USD.
Slightly overbought conditions and a positive risk tone act as a headwind for the precious metal.
Gold price (XAU/USD) enters a bullish consolidation phase after touching a fresh all-time peak during the Asian session on Thursday. Bulls now seem reluctant to place fresh bets amid slightly overbought conditions and a positive risk tone, which tends to undermine the safe-haven precious metal. Any meaningful corrective decline, however, still seems elusive in the wake of the growing uncertainty over US President Donald Trump's trade policies and their impact on the global economy.
Apart from this, geopolitical risk and dovish Federal Reserve (Fed) expectations should act as a tailwind for the non-yielding Gold price. Meanwhile, the US Dollar (USD) struggles to gain any meaningful traction and languishes near its lowest level since October touched earlier this week amid bets that the Fed will resume its rate-cutting cycle soon. This could further contribute to limiting the downside for the commodity and warrants caution before confirming a near-term top for the bullion.
Daily Digest Market Movers: Gold price continues to attract safe-haven flows amid trade jitters, geopolitical risks
Asian equity markets track the overnight gains on Wall Street, bolstered by the Federal Reserve's decision to keep interest rates unchanged and maintain its rate cut forecast for the year. As was widely expected, the US central bank held interest rates steady for the second straight meeting and signaled that it would deliver two 25 basis points rate cuts by the end of this year.
Adding to this, US President Donald Trump and Russian President Vladimir Putin agreed on Tuesday for an immediate pause in strikes against energy infrastructure in the Ukraine war. Moreover, Ukrainian President Volodymyr Zelenskiy and Trump also agreed to work together to end the protracted Russia-Ukraine war, which further boosted investors' confidence.
Meanwhile, Fed officials trimmed their growth forecast for the year amid the growing uncertainty over the impact of the Trump administration's aggressive trade policies on economic activity. Trump imposed a flat 25% duty on steel and aluminum since February and has threatened to impose reciprocal and sectoral tariffs, fueling worries about a global trade war.
Traders now see over a 65% chance that the Fed would resume its rate-cutting cycle at the June policy meeting. This, in turn, fails to assist the US Dollar in registering any meaningful recovery from a multi-month low touched earlier this week and should lend some support to the non-yielding Gold price amid the risk of a further escalation of tensions in the Middle East.
The Israeli military said that it launched a limited ground incursion into Gaza, a day after an aerial bombardment of the strip that shattered the two-month-old ceasefire with Hamas. Moreover, Israeli Prime Minister Benjamin Netanyahu warned of fierce war expansion, which should continue to underpin the safe-haven precious metal and limit any corrective slide.
Traders now look forward to the latest monetary policy updates from the Bank of England and the Swiss National Bank. Later during the North American session, the US economic docket – featuring the usual Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Existing Home Sales data – could produce short-term opportunities around the XAU/USD.
Gold price needs to consolidate before the next leg up amid slightly overbought conditions on the daily chart
The daily Relative Strength Index (RSI) remains above the 70 mark, flashing overbought conditions and holding back bulls from placing fresh bets. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before traders start positioning for an extension of the recent well-established uptrend witnessed over the past three months or so. That said, the recent breakout through the $3,000 psychological mark and the subsequent move up suggest that the path of least resistance for the Gold price remains to the upside.
Meanwhile, any meaningful corrective slide is likely to attract some dip-buyers around the $3,023-3,022 area. This should help limit the downside near the $3,000 mark, which should now act as a key pivotal point for short-term traders. A convincing break below the latter might prompt some technical selling and drag the Gold price to the $2,980-2,978 intermediate support en route to the $2,956 region. The downward trajectory could extend further towards the $2,930 support before the XAU/USD drops to the $2,900 mark and last week's swing low, around the $2.880 area.
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