The gold price (XAU/USD) dipped below the $2,900 mark during early European trading on Monday, moving closer to the lower end of its recent trading range. Investors have brushed aside Friday’s weaker US jobs report, allowing the US Dollar (USD) to stage a modest rebound from its lowest level since November. This renewed strength in the USD has exerted downward pressure on gold.
However, expectations that the Federal Reserve (Fed) will implement multiple interest rate cuts this year, coupled with a significant intraday decline in US Treasury bond yields, may limit the downside for gold. Additionally, concerns regarding potential economic disruptions from US trade policies and tariffs could provide safe-haven support for the precious metal.
Key Highlights for Gold Price:
- Gold price weakens below $2,900 amid a stronger USD recovery.
- Fed rate cut expectations and falling Treasury yields may limit downside risks.
- Uncertainty surrounding US trade policies remains a key factor for market sentiment.
Gold Price Weakens as USD Recovers
At the start of the new trading week, market participants remain cautious due to ongoing uncertainty regarding US trade policies. Investors are particularly concerned about the potential economic slowdown resulting from trade tariffs, which could prompt the Fed to resume its rate-cutting cycle by mid-year.
Recent developments suggest that former President Donald Trump’s trade policies continue to be a focal point. Trump recently signaled uncertainty over impending tariffs on Canadian imports, stating they might be implemented as early as Monday or Tuesday. This follows the temporary waiver of steep tariffs on Canadian and Mexican goods under the US-Mexico-Canada Agreement (USMCA) framework.
Fed Chair Jerome Powell acknowledged on Friday that policy uncertainty remains elevated. San Francisco Fed President Mary Daly further emphasized that rising uncertainty among businesses could dampen US economic demand, though she does not foresee an immediate change in interest rate policy.
US Employment Data and Fed Rate Cuts Expectations
The latest US jobs report reaffirmed expectations of further policy easing by the Fed. February’s Nonfarm Payrolls report indicated that the US economy added 151K jobs, falling short of the 160K forecast. Additionally, January’s figures were revised downward from 143K to 125K. The unemployment rate unexpectedly edged higher to 4.1% from 4.0%, although wage growth showed some improvement.
With traders now pricing in three potential rate cuts of 25 basis points each by year-end, US Treasury bond yields have declined sharply. Despite these factors supporting gold, the metal has struggled to attract sustained buying momentum, suggesting that market caution persists.
Technical Analysis: Key Levels to Watch
From a technical perspective, gold has displayed resilience near the $2,900 mark, but repeated failures to break the $2,925-$2,930 resistance zone warrant caution for bullish traders. A decisive move above this supply zone could open the door for further upside, potentially challenging the all-time high of $2,956 reached on February 24.
Conversely, a firm break below the $2,900-$2,895 support level may trigger additional selling pressure. This could drive XAU/USD lower towards the $2,860-$2,858 region, with further downside potential extending to the February 28 low of $2,833-$2,832. A deeper correction might ultimately push prices down to the psychological $2,800 threshold.
US Dollar Strength and Market Sentiment
The USD’s performance against major currencies reflects its recovery from multi-month lows. The table below highlights the percentage changes of the US Dollar against key global currencies:
| Currency Pair | Percentage Change |
|---|---|
| USD/GBP | Strongest Gain |
| USD/EUR | Moderate Gain |
| USD/JPY | Slight Gain |
The heat map below further illustrates the relative strength of the USD against other major currencies:
Conclusion
The gold price remains vulnerable below the $2,900 threshold as the US Dollar stages a recovery. While Fed rate cut expectations and declining bond yields could cushion the downside, prevailing uncertainty surrounding trade policies and economic growth may continue to shape market movements. Traders should closely monitor upcoming Fed statements and key economic data releases for further directional cues.
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