Gold price (XAU/USD) experiences a bullish pause during the early European session, trading within a tight range above $2,770. This level is close to the multi-month high achieved earlier this Friday. The recent slide in the US Dollar (USD) to a one-month low has helped sustain the upward momentum for gold. This decline in the USD stems from a drop in US Treasury bond yields, driven by market expectations of interest rate cuts by the Federal Reserve (Fed). Additionally, US President Donald Trump’s optimistic comments about a potential trade deal with China have further pressured the USD.
Concerns over the global economic impact of trade protectionism have also fueled demand for gold as a safe-haven asset. However, the positive tone in equity markets and slightly overbought conditions in the short-term charts have limited further gains. Investors now await the release of US PMI data for further trading opportunities on the week’s last day.
Gold Price Gains Support from Fed Rate Cut Expectations
Market participants remain cautious about the economic consequences of protectionist policies, driving demand for gold. The USD’s decline to a monthly low reflects growing expectations of Fed interest rate cuts. These expectations are fueled by indications of easing inflationary pressures in the US economy.
President Trump’s remarks on a friendly conversation with Chinese President Xi Jinping and the potential for a trade deal have also calmed fears of escalating tariffs. This shift in sentiment strengthens the outlook for Fed policy easing, which benefits the non-yielding yellow metal. As a result, gold continues to attract bullish interest.
Flash PMI Data to Offer Further Insight
Traders are closely monitoring flash PMI data for insights into global economic health. This data could influence broader market sentiment and impact the XAU/USD. While gold prices remain buoyed by Fed rate cut bets and a weaker USD, investors remain cautious due to overbought technical indicators.
Technical Analysis: Gold Price Consolidates with a Bullish Bias
From a technical perspective, Thursday’s dip-buying and subsequent upward movement confirmed a bullish breakout above the $2,720-$2,725 supply zone. However, the daily chart’s Relative Strength Index (RSI) nears overbought territory, suggesting that a short-term consolidation or modest pullback might occur before further gains.
Key resistance is expected near the $2,790 level, close to gold’s all-time peak. On the downside, immediate support lies at the $2,760-$2,758 range. A drop below this level could push prices toward $2,735-$2,736. However, the $2,720-$2,725 area is likely to act as a strong support zone, limiting significant losses.
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