Gold prices (XAU/USD) maintained a positive trend for the second consecutive day on Tuesday, despite retreating slightly from a nearly two-week high during Asian trading. While easing US-China trade tensions have provided some relief, concerns over US President Donald Trump’s unpredictable trade policies continue to keep investors on edge. Persistent geopolitical risks, including the ongoing Russia-Ukraine conflict and Middle Eastern tensions, are also driving demand for the safe-haven asset.
The US Dollar (USD) remains under pressure, struggling to attract substantial buyers due to growing economic uncertainty stemming from Trump’s tariffs. This weakness in the Greenback has, in turn, supported Gold prices. However, traders are exercising caution ahead of the crucial Federal Open Market Committee (FOMC) policy meeting set to begin on Tuesday, refraining from aggressive bullish positions on Gold.
Market Movers: Geopolitical Risks and Trade Uncertainty Support Gold
During a recent interview aboard Air Force One, President Trump hinted at possible trade agreements with certain countries, though he did not name specifics. Trump also indicated openness to reducing tariffs on China, suggesting a potential easing of the ongoing tariff war between the US and China. On Friday, China’s Commerce Ministry confirmed it was reviewing the possibility of resuming trade talks with the US, further fueling optimism in the markets.
On the economic front, the US Institute for Supply Management (ISM) reported an uptick in the services sector growth for April, with the Services PMI rising to 51.6 from 50.8 in March, surpassing expectations. This, combined with strong US jobs data from the previous week, helped alleviate recession concerns and provided some support to the US Dollar after a two-day losing streak.
Despite this, Gold remained a popular asset for investors seeking refuge from the uncertainty created by Trump’s tariffs and ongoing geopolitical risks. Over the weekend, Trump announced a 100% tariff on films produced overseas, intensifying trade-related concerns.
Geopolitically, Russian authorities reported that Ukraine launched drones at Moscow for a second consecutive night, temporarily halting operations at the city’s three major airports. Additionally, Ukrainian forces targeted a power substation in Russia’s Kursk region. Meanwhile, Israel, in coordination with the US, carried out airstrikes on Yemen’s Hodeidah port in response to a ballistic missile attack by Houthi rebels on Sunday. These developments further supported safe-haven demand for Gold.
Looking Ahead: Focus on FOMC Meeting and Technical Indicators
Market attention is now shifting to the highly anticipated two-day FOMC meeting, which begins on Tuesday. With reduced expectations for a rate cut in June, traders are closely monitoring the accompanying policy statement and comments from Federal Reserve Chair Jerome Powell for insights on the future rate-cut path.
From a technical standpoint, Gold’s strong intraday gains have pushed it beyond the $3,350 resistance level, coinciding with the 50% Fibonacci retracement of its recent pullback from an all-time high. Positive oscillators on the daily chart suggest the upward trend may continue. A decisive move above the 61.8% Fibonacci level near $3,385 would strengthen the bullish outlook, paving the way for a potential push toward the $3,400 and $3,425 levels. Further gains could bring the psychological $3,500 mark into focus.
On the downside, the $3,350 region is expected to provide initial support, followed by the $3,325 and $3,300 levels. A break below $3,300 could trigger further selling, pushing Gold toward intermediate support zones near $3,275 and $3,245, with the $3,200 level possibly coming into play if bearish momentum continues.
