Gold prices are struggling to capitalize on the daily recovery after falling to multi-week lows. Prices remain below $3,050 despite attempts to rebound. In the Asian session, gold prices recorded a significant decline to their lowest level in more than three weeks, but without a clear follow-through.
Global Recession Affects Investor Sentiment
Fears of a global economic recession continue to significantly impact investor sentiment. This situation, coupled with escalating trade tensions, is boosting demand for safe-haven commodities such as gold. With growing concerns about the economic outlook, attention is turning to safe havens such as gold, a preferred choice for investors in times of economic stress.
Interest Rate Cut Pressure and Support for Gold
On the other hand, expectations of interest rate cuts by the Federal Reserve are contributing to the weakening of the US dollar. These expectations are also supporting the price of gold against the US dollar. Bets on further interest rate cuts reflect a move towards safe-haven markets amid pressure on the dollar. This suggests that markets are anticipating the Federal Reserve to take more aggressive steps regarding interest rate cuts.
Technical Analysis of Gold Price and Support and Resistance Zones
Technically, gold has seen some recovery near the $2,972-$2,971 area, its lowest level in four weeks. The yellow metal has also regained some upward momentum after touching this level. Gold’s overall movement appears to have been moderated in recent weeks due to broader market movements. The general decline in financial markets was partly influenced by US President Trump’s announcement of reciprocal tariffs on most trading partners.
People’s Bank of China data boosts gold demand
For its part, the People’s Bank of China (PBOC) announced an increase in its gold reserves for the fifth consecutive month. This addition supports gold’s strength as a safe haven commodity during times of economic and geopolitical turmoil. In March, the bank added approximately 0.09 million troy ounces to its reserves, indicating a continued strategy to strengthen gold holdings. This constitutes a positive factor that boosts global demand for the yellow metal.
Implications of US Tariffs
Previously, US President Donald Trump imposed new tariffs on most goods imported from various countries. These trade measures were a major cause of increased concerns about the impact of the tariffs on the global economy. US tariffs on China, which reached 54%, contributed to escalating tensions between the world’s two largest economies.
In response to these tariffs, the Chinese Ministry of Commerce announced an additional 34% tariff on US imports. This escalation in the trade conflict between the two countries had negative effects on global markets. This prompted investors to withdraw their funds from riskier markets and direct them to safe havens such as gold.
US Dollar Performance and Its Impact on Gold
Meanwhile, the US dollar retreated slightly after hitting multi-month lows. Despite its modest rebound last Friday, recent economic data showed a strong US economy, with the economy adding 228,000 jobs in March. This data reinforces expectations that the Federal Reserve will continue to gradually raise interest rates, which could further strengthen the US dollar.
Powell’s Statements on Inflation and Its Impact on Gold
In his remarks, Federal Reserve Chairman Jerome Powell confirmed that inflation has approached the bank’s target level, but remains somewhat elevated. Powell added that Trump’s tariffs could contribute to higher inflation in the United States, making the Fed’s task more challenging at this time.
XAU Outlook Amid Geopolitical Risks
Geopolitical risks continue to significantly impact gold prices. While the dollar is struggling to capitalize on the recent recovery, gold remains a preferred choice for investors under these conditions. Escalating tensions between the United States and China, along with other global political turmoil, reinforce gold’s status as a safe-haven investment vehicle.
Gold Technical Levels and Price Support
From a technical perspective, gold appears to be struggling to surpass the $3,055 resistance level. This level is considered a pivotal point for market traders. If gold can surpass this level, it could see further gains towards $3,080 and then $3,100.
On the other hand, there appears to be a strong support level near $3,000, which coincides with the 50% Fibonacci retracement level. If this level is broken, gold could see further declines towards $2,972-$2,971. This scenario reflects continued pressure on the yellow metal if it fails to surpass these resistance levels. The Impact of Economic Risks on Traders
Fears of an ongoing economic recession continue to influence the behavior of traders in gold markets. These traders are cautious amid the current volatility, with some resorting to liquidating their long positions and raising cash to cover losses in other markets. This limits the chances of a sharp rise in the price of gold, as investors remain conservative in the face of increased risks.
Gold faces significant challenges in capitalizing on the current recovery, as it continues to fluctuate between low and support levels. US tariffs and economic concerns continue to impact the market, increasing demand for gold as a safe haven. With expectations of further rate cuts by the Federal Reserve, there appears to be additional support for the price. However, traders remain cautious amid the ongoing market volatility.
