Gold prices (XAU/USD) are showing modest gains during the European session on Thursday. However, the upward momentum remains limited, keeping prices below the recent record high. Investors are closely monitoring the impact of US trade policies and economic data on the precious metal.
Trade War Fears Support Gold Prices
US President Donald Trump’s recent trade tariffs have raised concerns about a potential global trade war. These fears are driving investors toward safe-haven assets like gold. Additionally, a decline in US Treasury bond yields has weakened the US Dollar, further supporting gold prices.
Inflation Expectations Boost Gold’s Appeal
Trump’s protectionist policies are expected to fuel inflation in the US. Gold, often seen as a hedge against rising prices, stands to benefit from this trend. The latest US Consumer Price Index (CPI) data, released on Wednesday, reinforced expectations of persistent inflation.
The CPI rose by 0.5% in January, marking the highest increase since August 2023. Yearly inflation climbed to 3%, up from 2.9% in December. Core CPI, excluding food and energy, also showed a significant rise, indicating underlying inflationary pressures.
Fed’s Hawkish Stance Limits Gold’s Upside
Federal Reserve Chair Jerome Powell emphasized that the fight against inflation is ongoing. This suggests that interest rate cuts are unlikely until inflation returns to the 2% target. The Atlanta Fed President highlighted the resilience of the labor market and GDP, though inflation remains a concern.
Market participants now anticipate only one rate cut by the end of the year. This has led to a rise in the 10-year US Treasury yield, its largest one-day increase since December. Despite this, the US Dollar remains weak, providing additional support to gold prices.
US PPI Data in Focus
Thursday’s economic calendar includes the release of the US Producer Price Index (PPI) and Weekly Initial Jobless Claims. These reports could influence the US Dollar and provide further direction for gold prices.
Technical Outlook for Gold Prices
From a technical perspective, the daily Relative Strength Index (RSI) is in overbought territory, signaling caution for buyers. The $2,942-2,943 area, near the all-time peak, serves as a strong resistance level.
On the downside, a drop below 2,900couldexposethe2,900couldexposethe2,864 support level. Further selling pressure might push gold prices toward the 2,834−2,832region,withthe2,834−2,832region,withthe2,800 mark as a key support zone.
For more insights on gold market trends, visit Daily Gold Signal. Stay updated with the latest gold price movements at Daily Gold Updates.
