After reaching an unprecedented high near $3,500 per ounce, gold (XAU/USD) saw a modest pullback on Tuesday morning. The dip is largely attributed to a brief pause by investors following a sustained rally in recent weeks.
Despite the short-term retreat, sentiment in the market remains firmly optimistic. Ongoing demand for safe-haven assets continues to support gold prices, driven by lingering commercial disputes and geopolitical tensions.
Trade Tensions Reinforce Gold's Appeal
Gold’s upward trajectory remains closely tied to global macroeconomic and political developments. The aggressive trade stance of U.S. President Donald Trump has heightened market uncertainty. His administration’s unpredictable tariff announcements have eroded investor confidence in the resilience of the American economy.
Recent tariffs imposed by the White House have further stoked fears of an impending recession, prompting a shift toward safer investments such as gold.
Strained Relations with the Fed Add to Uncertainty
Further pressuring the U.S. dollar, President Trump has renewed criticism of the Federal Reserve and its chairman, Jerome Powell. Trump’s dissatisfaction with the Fed’s cautious approach to rate cuts has sparked fresh concerns over the central bank’s independence.
Sources suggest that the administration is even considering removing Powell before the end of his term. These developments have contributed to a weakening dollar, increasing the attractiveness of non-yielding assets like gold, especially in a low-interest-rate environment.
Market Eyes Upcoming Rate Cuts
nvestor expectations are leaning toward a 25 basis point interest rate cut by the Fed in June, with projections pointing to at least three cuts throughout 2025. This dovish outlook fuels bullish sentiment for gold, which thrives in environments of monetary easing and low yields.
However, analysts warn that if geopolitical tensions subside, the anticipated rate cuts could instead drive capital back into riskier assets, potentially dampening gold’s appeal.
Escalating Conflict in Ukraine Drives Demand for Safe-Haven Assets
n addition to economic headwinds, geopolitical instability—particularly the conflict in Eastern Europe—continues to boost demand for gold. Over the past few hours, Russia launched 96 drones and three missiles across eastern and southern Ukraine, breaking a short-lived Easter truce that lasted only 30 hours. These developments have further underscored gold’s role as a safe-haven asset amid growing global instability.
Key Economic Indicators Ahead
Market participants are closely watching upcoming economic data, including the Richmond Manufacturing Index and comments from key Federal Open Market Committee (FOMC) members. However, attention is primarily focused on Wednesday’s release of flash PMI figures, which are expected to offer fresh insight into the state of the global economy and may significantly influence gold prices.
Technical Analysis: Pullback on the Horizon?
From a technical perspective, gold appears to be in overbought territory. The Relative Strength Index (RSI) remains above 70 on the daily chart, signaling that a short-term consolidation or correction may be on the horizon.
Analysts are identifying key support levels to monitor in the event of a deeper retracement. Initial support lies around $3,425–$3,423, followed by the psychologically significant $3,400 mark. Further declines could push prices toward the $3,358–$3,357 range, with a critical support zone near $3,344. A break below this level may open the door to more substantial losses.
Outlook: A Brief Pause in a Strong Uptrend
In conclusion, while gold has paused its historic rally, the current dip appears more like a necessary correction than a change in direction. The broader landscape—marked by economic uncertainty, political tensions with the Fed, and escalating military conflict—continues to favor a bullish outlook for gold in the medium to long term.