Daily Price Outlook
Gold prices (XAU/USD) continue to slide, struggling to find support around the $2,890 level, with an intra-day dip to $2,883. However, the main reason behind this decline is the strengthening US Dollar, which gained momentum after Fed Chair Jerome Powell’s comments on Tuesday.
His remarks signaled that the Federal Reserve may keep interest rates higher for longer, reducing the appeal of gold. As a result, investors are leaning towards the dollar, putting further pressure on gold prices.
Meanwhile, the upbeat mood in the markets has made investors less interested in gold, which is typically seen as a safe-haven asset. On top of that, worries about a potential economic slowdown fueled by former US President Donald Trump’s trade tariffs and the risk of a global trade war could still keep gold from falling too much, as investors may turn back to it for safety.
Stronger US Dollar and Fed’s Cautious Stance Weigh on Gold Prices
On the US front, the broad-based US Dollar Index (DXY) is holding strong near 108.00 as traders await key inflation data. The US Consumer Price Index (CPI) report, set to be released on Wednesday, is expected to show headline inflation steady at 2.9% year-over-year, while core inflation may slightly dip to 3.1% from 3.2%.
Fed Chair Jerome Powell, in his testimony to Congress, stated that the central bank is in no rush to cut interest rates, citing a strong job market and stable economic growth.
He also warned that former President Donald Trump's new tariffs on imports could push prices higher, making it even harder for the Fed to lower rates.
Consequently, the market now expects the Federal Reserve to delay interest rate cuts, possibly until the next quarter, as inflation concerns remain.
Many economists who previously predicted a rate cut in March have revised their expectations, with most now anticipating a cut by June.
As a result, the US Dollar continues to gain strength as the Fed signals a cautious approach, following January’s jobs report, which showed slowing job growth but a lower unemployment rate.
Meanwhile, Fed officials have expressed mixed views, with some, like Neel Kashkari, open to supporting rate cuts if inflation data improves while the job market stays strong.
For gold prices, this outlook is bearish, as a stronger US Dollar and delayed rate cuts make the precious metal less attractive. Moreover, Trump's decision to expand tariffs on steel and aluminum could further fuel inflation, potentially forcing the Fed to keep rates higher for longer.
GOLD (XAU/USD) – Technical Analysis
Gold (XAU/USD) is experiencing downward pressure, trading at $2,886.14, slipping 0.01% as the stronger U.S. dollar and hawkish Federal Reserve outlook weigh on sentiment. The metal remains below its pivot point at $2,898.48, signaling a potential continuation of bearish momentum.
On the technical front, the 50-day EMA at $2,854.23 is acting as a key support level, while immediate resistance stands at $2,943.27. A break above this level could trigger further upside towards $2,966.54, with an extended rally possible up to $2,990.75. However, the current structure suggests a lower probability of a breakout as long as the dollar remains strong.
Downside risks persist, with $2,862.33 serving as immediate support. A break below this level could accelerate selling pressure, exposing $2,833.82 and potentially deeper support at $2,806.78. Given the setup, traders may consider short positions below $2,898, targeting $2,862, with a stop loss at $2,920 to manage risk.
Gold’s near-term trend will likely be dictated by upcoming U.S. economic data, particularly inflation figures and any shifts in Federal Reserve rate expectations. If inflation softens, gold could regain ground; however, persistently high inflation may reinforce the dollar’s strength, limiting gold’s upside potential.
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