Gold Price Retreats After Hitting Record $3,500 High but Safe-Haven Demand Keeps the Bullish Bias Intact.
Gold (XAU/USD) touched an all-time high of $3,500 during early European trading on Tuesday, only to see a modest pullback as traders booked profits amid overbought technical conditions. However, the correction appears shallow and contained, with robust fundamental tailwinds keeping the metal buoyant. With the backdrop of intensifying geopolitical tensions, mounting uncertainty surrounding U.S. economic policy, and a sharply weakening U.S. Dollar, gold continues to find strong support, suggesting that the broader uptrend remains well intact.
Gold Rally Pauses But Remains Fundamentally Supported
The retreat in gold prices on Tuesday should not be misread as a change in sentiment. Rather, it’s a technical breather after an explosive rally that saw the precious metal gain over $150 in just a few days. The rise to $3,500 marks an unprecedented milestone, driven by the convergence of multiple macroeconomic stressors that have heightened investor anxiety.
Primary among these are the aggressive tariff policies of U.S. President Donald Trump and the renewed escalation in the U.S.-China trade war. Trump’s recent imposition of sweeping new tariffs—along with threats of additional punitive measures—has not only disrupted global supply chains but also stirred fears of a full-blown trade conflict. As trade tensions deepen, investors are increasingly flocking to gold as a traditional safe haven.
Trump’s Fed Hostility Casts Shadow Over Monetary Independence
In addition to his trade policy, Trump has also renewed his verbal assault on Federal Reserve Chairman Jerome Powell. The president’s public accusations that Powell is failing to lower interest rates quickly enough have raised red flags about the independence of the U.S. central bank. More dramatically, there are reports that Trump’s administration is studying the legal feasibility of removing Powell before the end of his term.
These developments have intensified investor uncertainty. A loss of Fed independence would likely erode confidence in the U.S. monetary system and could trigger erratic policy shifts, making gold an even more attractive hedge. At the same time, mounting speculation about interest rate cuts by the Fed—now seen as more probable in light of political pressure and economic headwinds—has weighed heavily on the U.S. Dollar, further supporting gold’s bullish case.
US Dollar at Multi-Year Low as Fed Rate Cuts Priced In
The U.S. Dollar Index (DXY) has slumped to its lowest levels since April 2022, reflecting both geopolitical jitters and expectations of looser monetary policy. According to the CME Group’s FedWatch Tool, markets are now pricing in a 25 basis-point rate cut in June, followed by at least two more cuts by the end of 2025.
For a non-yielding asset like gold, lower interest rates are highly supportive, as they reduce the opportunity cost of holding the metal. With real yields falling and inflation remaining persistent in many economies, the relative attractiveness of gold continues to rise.
Russia-Ukraine Conflict Reignites Geopolitical Risk Premium
Beyond the domestic issues roiling the U.S. economic landscape, geopolitical risk remains a major driver of gold’s upward momentum. In a dramatic overnight escalation, Russian forces launched a wave of attacks on Ukrainian targets, deploying 96 drones and three missiles. This comes after a briefly observed 30-hour Easter ceasefire that had offered a glimmer of de-escalation.
The re-intensification of the conflict underscores the fragility of the global security environment. Gold often serves as a hedge not only against inflation and currency devaluation but also against geopolitical shocks. Renewed warfare on the European continent—and the potential for spillover effects—has added a fresh risk premium to the yellow metal.
Short-Term Technicals Suggest Caution but Trend Stays Bullish
From a technical perspective, gold’s relative strength index (RSI) on the 4-hour and daily charts suggests extremely overbought conditions, which explains the current pause in upside momentum. However, the dip is so far shallow and supported near the $3,470–$3,480 region, indicating that buyers remain active on minor pullbacks.
The $3,500 level has now become a new psychological support zone, with upward momentum likely to resume once consolidation completes. Any deeper retracement is expected to attract fresh buying interest near the $3,420-$3,440 area, which coincides with previous breakout levels and the 20-period EMA on the 4H chart.
Upcoming Data Could Drive Near-Term Volatility
While gold’s macro drivers remain bullish, short-term price action may be influenced by key economic data releases. Investors are closely watching Tuesday’s Richmond Manufacturing Index from the U.S., which could offer clues about regional economic conditions.
More importantly, Wednesday’s global flash PMIs (Purchasing Managers’ Indices) are expected to provide insights into the broader economic landscape across the U.S., Eurozone, and Asia. Weak data could reinforce expectations of central bank easing, particularly by the Fed and the ECB, thereby lifting gold further.
Additionally, a flurry of speeches by influential Federal Open Market Committee (FOMC) members throughout the week will be closely scrutinized. Any dovish commentary or hints of policy pivot could add fuel to gold’s ongoing rally.
Conclusion: Gold Rally May Take a Breather, But the Path of Least Resistance Remains Up
In summary, gold’s brief pullback from its record high of $3,500 appears to be a healthy pause rather than a reversal. The combination of political uncertainty in the U.S., weakening USD, fears of central bank interference, escalating geopolitical tensions, and dovish monetary policy expectations create a perfect storm for gold to maintain its upward trajectory.
As long as these risks remain unresolved, gold is likely to continue drawing strong safe-haven inflows. Traders should view any corrective declines as potential buying opportunities within a strong structural bull market.
