- Gold prices gained some traction on Monday amid a slight waning of the US dollar.
- They bet that if the Fed cuts interest rates again, the USD will be damaged and will benefit the Xau/USD pair.
- Concerns about Trump's tariff plans and world trade war also support the goods.
Gold Price (XAU/USD) attracts some buyers on the first day of the new week and moves away from the three-week lows near the 2,833-2,832 area touched on Friday. Traders continue to price the Federal Reserve potentially cut two points by the end of the year amid signs of worsening consumer sentiment. This will help the US dollar (USD) fail to help exploit three-day-old recovery from more than two months, helping to revive low metal demand for non-two months.
Additionally, investors continue to worry about a potential economic fallout from US President Donald Trump's trade tariffs. This, along with sustained geopolitical risks, has proven to be another factor supporting the demand for safe gold prices. That said, positive risk tones generally maintain the lid on further evaluation movements of bullion. This requires some attention before placing a fresh bullish bet on Xau/USD as traders look forward to this week's important US macro release for a fresh directional drive.
Gold Price Bulls does not appear to be committed in a positive risk tone. The downside appears to be eased
- The U.S. Bureau of Economic Analysis reported on Friday that the personal consumption expenditure (PCE) price index rose 0.3% in January, up 2.5% in the past 12 months, a slight decline from 2.6% in December.
- In addition to this, the Core PCE Price Index, which excludes unstable food and energy prices, rose 0.3% last month, up 2.6% per year in January, marking a marked slowdown from 2.9% in the previous month.
- The report further revealed that U.S. consumer spending fell 0.2% last month, marking its first decline since March 2023 and the biggest decline in nearly four years, driving concerns about the US growth outlook.
- Market participants are priced the possibility that the Federal Reserve will resume cut rates at its policy meeting in June and will again lower borrowing costs in September, according to CME Group's FedWatch tool.
- This comes in addition to concerns that US President Donald Trump's trade tariffs will weaken consumer spending and fail to support the US dollar in a three-day-old recovery move from a low of more than two months.
- Trump confirmed that tariffs will be imposed on Canada and Mexico starting Tuesday, and announced plans to double the 10% universal tariff on imports from China, increase the risk of a global trade war and benefit safe gold prices.
- Traders are currently looking at US ISM Manufacturing PMI for some kind of driving force later this Monday. Apart from this, other significant US macro releases, including Friday's non-farm salary report, should have an impact on the short-term US dollar trajectory.
Gold prices appear to be vulnerable while below the 23.6% FIBO. Retracement Level Support Breakpoints
From a technical standpoint, the collapse below Fibonacci's 23.6% retreat level at last December-February rallies was seen as a key trigger for sellers. Plus, the daily chart oscillator is just beginning to gain negative traction, with prospects on the back for an extension of the correct pullback from the highest peak ever.
Therefore, subsequent moves are still considered as sales opportunities and close close to the $2,885 area. This is followed by the $2,900 mark, with gold prices likely rising to the $2,956 region to a hurdle of around $2,934.
Conversely, Friday's swing appears to be low back and forth in the $2,833-$2,832 zone, protecting the immediate downside, and then the gold price could drop to 38.2% FIBO. Levels, $2,815-2,810 Region. Some follow-throughs below $2,800 suggest that products are at the top and can pave the way for deeper losses.
