Gold Pull Back from Record High Amid Profit-Taking and Rebounding Dollar Strength.
Gold (XAUUSD) prices slipped modestly on Thursday after reaching a fresh all-time high, as a combination of profit-taking, a modest US Dollar (USD) rebound, and improved risk sentiment sparked a temporary retreat in the precious metal. The pullback, however, appears shallow and lacks strong conviction, suggesting that underlying support for the yellow metal remains firm amid persistent geopolitical tensions and ongoing recession fears.
Gold Retreats After Hitting New Peak, But Safe-Haven Demand Lingers
Following a historic surge that took Gold to a new record high earlier in the day, the metal witnessed intraday selling pressure as investors booked profits. The retracement followed an explosive rally on Wednesday driven by haven demand and renewed US-China trade tensions. However, a slight improvement in global market sentiment and a firmer USD saw traders pausing on long positions.
Despite the intraday drop, the broader bullish narrative remains intact. Gold continues to benefit from macroeconomic uncertainty, the rising specter of a global recession, and the ongoing geopolitical standoff between the United States and China.
Modest Dollar Recovery and Risk-On Sentiment Spark Profit-Taking
The greenback posted a mild uptick on Thursday, supported by better-than-expected US retail sales data. According to the US Census Bureau, Retail Sales jumped 1.4% in March – the highest monthly gain in over two years – beating market expectations of 1.3%. The solid consumer spending data signals continued economic resilience and temporarily buoyed the dollar, putting pressure on dollar-denominated commodities like gold.
Adding to the downside pressure, global equity markets, particularly in the Asia-Pacific region, saw broad-based gains on Thursday. Improved sentiment came as markets digested reports that the US and China could resume trade talks, despite escalating tensions. This optimism encouraged risk-taking, leading to a reduced appetite for safe-haven assets.
US-China Trade War Heats Up, Supporting the Bullish Gold Narrative
While the short-term dip in gold price reflects market dynamics such as profit-taking and dollar movement, the long-term bullish case for gold remains rooted in macro and geopolitical risks. The intensifying trade conflict between the world’s two largest economies continues to fuel safe-haven flows.
Earlier this month, US President Donald Trump ratcheted up trade tensions by imposing a staggering 145% tariff on key Chinese imports. In response, Beijing struck back with its own set of 125% retaliatory tariffs, specifically targeting sensitive US goods. China also introduced new licensing restrictions on exports of seven critical rare earth elements, crucial for tech manufacturing.
The US retaliated further by tightening export controls on advanced H20 AI chips to Chinese firms. In a sharp response, China’s Foreign Ministry issued a stern warning, indicating Beijing would not capitulate to Washington’s trade pressure. This tit-for-tat exchange has spooked investors and heightened concerns about long-term supply chain disruptions and global economic deceleration.
Fed Stays Hawkish – But Market Expects a Dovish Pivot
On the monetary policy front, Federal Reserve Chair Jerome Powell pushed back on rate cut expectations, citing inflationary risks potentially arising from tariffs and supply chain distortions. Powell emphasized that the Fed was not inclined to ease rates prematurely, especially with inflation showing stickiness in key segments.
However, traders remain unconvinced. Market pricing suggests that expectations of a rate cut as early as June are gaining traction. Slowing economic indicators, rising unemployment claims, and weakening housing market data have increased the likelihood that the Fed may pivot toward easing later this year.
Lower interest rates tend to support gold prices as they reduce the opportunity cost of holding non-yielding assets. As such, expectations for monetary policy easing continue to act as a supportive backdrop for gold, despite Powell’s current hawkish rhetoric.
Recession Fears Continue to Undergird Gold’s Appeal
Beyond the immediate impact of tariffs and central bank policy, broader recession fears remain a key driver of gold’s long-term appeal. The global economy faces headwinds from tightening credit conditions, geopolitical instability, and persistent inflationary pressures.
Investors are increasingly hedging their portfolios with gold as a defensive asset, especially as signs of economic fatigue surface in Europe and China. In the US, a flattening yield curve and rising corporate defaults are flashing early warning signs of a potential downturn. The International Monetary Fund (IMF) recently revised its global growth forecast downward, citing rising geopolitical tensions and weak industrial output across major economies.
Upcoming US Data and Fed-Speak Could Provide Fresh Direction
Looking ahead, market participants will closely monitor the US economic calendar for further cues. Thursday’s docket includes key data releases such as the Weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing Index, and housing starts figures. These indicators will offer additional insight into the health of the US economy and could sway market expectations regarding future Fed action.
In addition, speeches from Fed officials scheduled throughout the week will be scrutinized for any dovish shifts in tone that could signal a policy pivot. Any indication that the Fed is leaning toward cutting rates sooner than expected could reignite gold’s rally and push prices toward another record high.
Technical Outlook: Gold’s Pullback Appears Temporary Amid Bullish Bias
From a technical standpoint, the gold price continues to trade within a well-defined uptrend, despite the recent correction. The brief pullback after hitting a new high reflects healthy market consolidation rather than a reversal.
Key support is seen near the $2,330-$2,310 zone, a region that previously acted as resistance. A sustained break below this level could expose the $2,280 handle, though buying interest is likely to emerge well ahead of that mark. On the upside, a decisive move above the recent all-time high near $2,370 would open the doors for a fresh leg higher, with potential targets near $2,400 and beyond.
Momentum indicators like the RSI remain in bullish territory, although slightly overbought, reinforcing the case for a short-term pause before the next upward impulse.
Conclusion
While gold prices are experiencing a short-term retreat from record highs, the broader macroeconomic and geopolitical environment continues to favor the precious metal. Safe-haven demand remains robust amid escalating trade tensions between the US and China, recession concerns, and uncertainties surrounding central bank policy. Though temporary profit-taking and a modest rebound in the US Dollar may weigh on gold in the short term, the path of least resistance remains to the upside, particularly if incoming economic data and Fed commentary lean dovish.
