Gold prices rise for the second day in a row as investors worry about a global trade war.
During the Asian session on Tuesday, gold (XAUUSD) traded with a moderate positive bias over the $2,900 mark, but it lacked bullish conviction and remained limited in a familiar range that had lasted for the past week or so. Investors remain concerned that US President Donald Trump’s promise of reciprocal tariffs could spark a global trade war. This turns out to be a major factor This continues to support demand for safe-haven bullion.
Bets that the Fed will lower rates further strengthen the non-yielding yellow metal.
The expectations that Federal Reserve (Fed) would lower interest rates further this year, reinforced by an unexpected dip in US retail sales, provide support for the non-yielding gold price. However, a goodish bounce in US Treasury bond yields and a minor US Dollar (USD) upswing prevent XAUUSD bulls from putting new wagers. Nonetheless, the uncertainty surrounding Trump’s trade policy should serve as a positive for the commodity.
Daily Market Update: Gold price continues to draw haven flows amid concerns about Trump’s trade policies.
On Friday, US President Donald Trump threatened to impose automotive taxes as early as April 2. This is on top of Trump’s reciprocal tariff measures. on countries that impose tariffs on US imports, and continues to support the safe-haven gold price.
The disappointing publication of US retail sales data on Friday, combined with mixed inflation signals, suggests that the Federal Reserve may lower rates at its September or October policy meeting. Fed Funds Futures forecast a 40 basis point rate decrease in 2025.
On Monday, Philadelphia Fed President Patrick Harker stated that the labor market basically balanced, and that the current economy supports for a stable policy, since inflation remained sticky in recent months. Future Fed rate policy decisions would be data-driven, Harker emphasized.
Fed Board of Governors member Michelle Bowman highlighted that elevated asset prices may have hampered efforts on inflation.
Fed Board of Governors member Michelle Bowman highlighted that elevated asset prices may have hampered efforts on inflation Before interest rates are reduced, more clarity about lowering inflation is required. Bowman noted that pay growth above the amount is in line with the Fed’s inflation aim.
Christopher Waller, a Fed Board of Governors member, stated that inflation development last year was excruciatingly sluggish, and that rate reduction would be warranted in 2025 if inflation followed the 2024 pattern. Waller anticipates disinflation and interest rate reduction to continue year after year.
USD increase could limit gains, but the bias remains in favor of bulls.
The US dollar attracts some buyers and appears to have broken a three-day losing skid, reaching its lowest level since December 17. This could prevent traders from placing strong bullish wagers on the XAUUSD, limiting any further appreciation.
Traders await the release of the Empire State Manufacturing Index from the United States will provide some push later in the North American session. Aside from this, speeches by important FOMC members would boost USD demand and create short-term trading opportunities.
