Gold price consolidates near all-time peak as bulls pause for breather
- Gold price refreshes record high as escalating US-China trade war boosts safe-haven demand.
- US recession fears, Fed rate cut bets and a bearish USD further benefit the XAU/USD pair.
- Improving risk sentiment might cap the precious metal amid a slightly overbought daily RSI.
Gold price (XAU/USD) enters a bullish consolidation phase and oscillates in a range around the $3,230 region, just below a fresh all-time peak touched during the Asian session on Monday. Bulls pause for a breather amid slightly overbought conditions on the daily chart, though the fundamental backdrop suggests that the path of least resistance for the bullion remains to the upside. Despite US President Donald Trump's decision last week to pause sweeping reciprocal tariffs for 90 days, a sharp escalation in US-China trade tensions continues to weigh on investor sentiment and underpin the safe-haven precious metal.
Meanwhile, the recent sell-off in the US bond market raises fears that confidence in the US economy is fading. Furthermore, data released last Thursday showed that US inflation cooled to a six-month low in March, reaffirming bets that the Federal Reserve (Fed) will resume its rate-cutting cycle soon. Moreover, the US central bank is expected to lower borrowing costs at least three times this year. This has been a key factor behind the recent US Dollar (USD) slump to its lowest level since April 2022 and should turn out to be another factor acting as a tailwind for the non-yielding Gold price, validating the positive outlook.
Daily Digest Market Movers: Gold price continues to draw support from rising US-China trade tensions
- China increased its tariffs on US imports to 125% on Friday in retaliation for US President Donald Trump's decision to raise duties on Chinese goods to a combined 145%. This, in turn, adds to market concerns that the escalating trade war between the world's two largest economies would weaken global economic growth and lift the safe-haven Gold price to a fresh all-time peak.
- Meanwhile, the recent unusual spike in US Treasury yields suggests that investors are dumping US government bonds amid the weakening confidence in the US economy. Adding to this, the prospects for more aggressive policy easing by the Federal Reserve (Fed), bolstered by the US consumer inflation data released last week, keep the US Dollar depressed and further benefit the commodity.
- The US Bureau of Labor Statistics reported last Thursday that the headline Consumer Price Index (CPI) fell 0.1% in March and the yearly rate decelerated sharply to 2.4% from 2.8% in February. Moreover, the core CPI, which strips out food and energy, rose just 0.1% from the month before and came in at 2.8% for the 12 months ended in March, marking its lowest rate in nearly four years.
- Traders are now pricing in 90 basis points of Fed rate cuts by year-end 2025, which might further contribute to driving flows towards the non-yielding yellow metal. Moreover, investors expect tariffs to push inflation higher in the coming months. This could further underpin the XAU/USD's status as a hedge against rising prices and support prospects for a further near-term appreciation.
- Market participants this week will closely scrutinize comments from influential FOMC members, including Fed Chair Jerome Powell on Wednesday, for cues about the future rate-cut path. Apart from this, the US monthly Retail Sales figures, also due on Wednesday, will drive the USD demand and provide some meaningful impetus to the precious metal during the latter half of the week.
Gold price needs to consolidate before the next leg up amid slightly overbought daily RSI
From a technical perspective, the daily Relative Strength Index (RSI) is holding just above the 70 mark and points to slightly overstretched conditions. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before traders start positioning for a fresh leg up. Meanwhile, any corrective slide could be seen as a buying opportunity near the $3,200 round figure, which, in turn, should help limit the downside for the Gold price near the $3,168-3,167 region. The latter should act as a strong base and a key pivotal point for short-term traders.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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