Gold Price (XAU/USD) Struggles at $2,900 Amid Volatile Fed Outlook and Escalating Tariff Tensions
XAU/USD Faces Resistance Despite Intensifying Economic Uncertainty
Gold prices, trading under the symbol XAU/USD, have encountered firm resistance around the crucial $2,900 level after previously surging sharply, driven by investor anxiety over the volatile economic climate and Fed policy ambiguity. As of the latest session, Gold is hovering just beneath the $2,900 psychological barrier at approximately $2,899.40, showing mild pressure from profit-taking following a recent sharp rally. While the precious metal reached as high as $2,931 in its latest push upwards, it has since retraced slightly, caught in the crosswinds of opposing macroeconomic and geopolitical factors.
Tariffs and Trade Tensions Add Uncertainty, Supporting XAU/USD’s Bullish Narrative
The recent decision by former U.S. President Donald Trump to implement tariffs on goods from major trade partners Canada and Mexico initially rattled markets, fueling a flight to safe-haven assets, benefiting Gold (XAU/USD). Trump imposed these tariffs aggressively last week, but shortly after, announced temporary exemptions for many imports until early April. This erratic trade stance has injected substantial uncertainty into global markets, illustrated clearly by rising volatility indices and declining stock market indices; for example, the S&P 500 Futures were down 1.1%, while the Nasdaq slid by more than 2%. With markets remaining wary of Trump's unpredictable policy moves, investor anxiety could increasingly funnel capital into Gold as a defensive allocation, potentially driving it back above $2,931 in the short term.
Technical Indicators Suggest Caution Around XAU/USD’s Near-Term Direction
From a purely technical perspective, XAU/USD has displayed significant resilience above key support at $2,895, backed notably by the 50-day Exponential Moving Average (EMA), reinforcing its bullish foundation despite the current consolidation phase. On the 4-hour technical charts, Gold's price movement is presently defined by a bearish tilt, with lower highs confirming selling pressure after hitting the $2,931 resistance. A clear technical pattern resembling a bearish channel has formed, creating downside pressure, with key support resting at $2,870. If the price breaches that critical support convincingly, XAU/USD could face additional downside risks toward lower key areas at $2,858 or even the psychologically important $2,835 region, its recent interim low.
However, on the upside, sustained buying momentum above the immediate resistance at $2,930 could propel Gold rapidly toward retesting and possibly surpassing its all-time peak around $2,956 recorded in late February. At present, the technical oscillators including the RSI (Relative Strength Index) remain neutral-to-bullish but have cooled from previous overbought readings, indicating traders might wait cautiously before making aggressive moves either way.
US Economic Indicators Point to Potential Fed Rate Cuts, Supporting Gold Price
The United States' latest macroeconomic indicators paint a troubling picture for dollar bulls, but conversely supportive for Gold prices. February's Non-Farm Payroll (NFP) employment figures significantly underperformed forecasts, with the economy adding only 151,000 new positions, noticeably below the expected 160,000 and down from a revised 125,000 the previous month. Even more concerning, the unemployment rate rose to 4.1%, hitting a nearly two-year peak and raising legitimate questions about the sustainability of America's economic strength. With unemployment edging upward, investors are becoming increasingly skeptical about the Federal Reserve’s previously hawkish narrative, now betting heavily that the Fed could resume cutting interest rates as early as June. These growing expectations have subsequently pressured the U.S. Dollar Index (DXY), down to approximately 103.85, maintaining bearish momentum and benefiting gold as an appealing alternative for investors.
Moreover, the upcoming Consumer Price Index (CPI) data on March 12 carries considerable weight. Market consensus expects a moderation to 2.9% annually from a previous 3.0%, with core CPI forecast to slow from 0.4% to 0.3% month-on-month. If inflation indeed moderates, this would significantly reinforce expectations for monetary easing, potentially pushing XAU/USD upward as investors pivot towards safe havens to hedge against currency devaluation risk.
Global Economic Risks Amplify Demand for XAU/USD as Safe Haven
Further bolstering the bullish case for Gold (XAU/USD) is China's alarming economic slowdown. Recent Chinese inflation figures underscored notable deflationary pressures, with February’s Consumer Price Index (CPI) contracting by 0.7% year-over-year, marking its lowest reading in over a year. Additionally, Producer Price Index (PPI) numbers continued to languish in negative territory, declining 2.2% annually. The deflationary signs from the world's second-largest economy raise deep concerns about global growth, amplifying market anxiety and volatility, as reflected by recent stock market turbulence in Asia and Europe. For instance, Chinese PPI shrank less severely than expected, but CPI plunged unexpectedly by 0.7%, exacerbating fears that prolonged deflation in China could spill over internationally, further supporting investment demand for Gold as a hedge against economic turmoil.
Simultaneously, European economic indicators show incremental signs of stabilization, with German industrial production rebounding 2% month-over-month in January but still declining by 1.6% year-on-year. Eurozone investor sentiment also saw a noteworthy improvement, climbing to -2.9 from the previous dismal reading of -12.7. These mixed signals from Europe suggest the Eurozone remains vulnerable to external shocks, reinforcing demand for safe-haven assets such as XAU/USD, particularly amid heightened US-China trade tensions and ongoing geopolitical instability triggered by Trump's protectionist policies.
Impact of Central Bank Policies and ETF Demand on Gold (XAU/USD) Prices
Central banks, notably those in China and Japan, have continued to accumulate gold reserves amidst escalating geopolitical and economic uncertainty. February alone saw global gold-backed ETF funds attract inflows nearing 100 tonnes, equivalent to approximately $9.4 billion, marking the largest monthly inflow since March 2022. This massive institutional demand underscores the market’s view that XAU/USD is positioned favorably as protection against global economic turbulence and inflationary pressures. Central banks in emerging markets, wary of escalating tariff threats and rising uncertainty, are adding aggressively to gold reserves, signaling long-term bullish sentiment for the precious metal. These inflows highlight institutional conviction that gold could provide superior returns relative to equities or fixed-income instruments during a prolonged economic slowdown or market correction.
Technical Outlook: XAU/USD Near-Term Levels and Price Targets
XAU/USD is currently trading in a consolidative phase between $2,895 and $2,930. Despite the recent downside moves, Gold has successfully defended key support levels repeatedly, demonstrating robust buying interest at the $2,895 region. Technical indicators, however, provide a mixed outlook. Although the longer-term trend remains bullish, the failure to sustain momentum above $2,930 introduces short-term bearish risks. Should sellers manage to breach $2,895 decisively, the price could decline sharply to $2,860, and a deeper correction toward the February lows around $2,835 cannot be ruled out.
Conversely, if the ongoing consolidation resolves to the upside, pushing the metal above $2,930, the market could swiftly target the critical psychological resistance at $3,000, potentially reaching the Fibonacci extension level near $3,300 over a medium-term timeframe. Still, short-term price action will largely depend on the upcoming U.S. CPI data, tariff-related developments, and market perception of Fed policy trajectory.
Given current market dynamics, investor sentiment favors a bullish bias on Gold, driven largely by uncertainties surrounding global growth, persistent U.S. tariff volatility, and expectations of Fed easing later in the year. This combination of factors suggests the precious metal may continue to serve as a favored safe-haven choice for investors navigating uncertain economic waters. With strong institutional buying support, XAU/USD is likely to maintain a bullish posture over the near term, especially as global risks and policy uncertainties remain elevated.
