Article by: ETO Markets
Gold prices (XAU/USD) have faced considerable downward pressure, dropping to a two-week low around the $… area amid modest USD strength following a 1% decline during Thursday's session. The sell-off was triggered by contradictory statements from US President Donald Trump regarding tariff implementations, with the President noting that "tariffs will go on, not all, but a lot of them" and confirming a 25% tariff on European imports. Despite the current correction, underlying support for gold remains intact due to ongoing expectations that the Federal Reserve (Fed) will cut interest rates further amid signs of a cooling US economy. However, the immediate upside for the precious metal is being capped by a modest pickup in US Treasury bond yields, which has allowed the USD to bounce from its lowest level since December 10. The generally positive tone around equity markets is also undermining demand for the safe-haven metal. Market participants now await Thursday's US economic data and Friday's Personal Consumption Expenditures (PCE) Price Index for further cues about the Fed's rate-cut trajectory.
From a technical standpoint, gold prices are likely to find immediate support near $…, a recent swing low. Further support could be located at $…, representing the 7-day SMA that is currently being tested. A break below this level could accelerate the decline towards the $… region, followed by the critical $… zone where both the 20-day SMA and Bollinger Band middle band converge. Failure to defend these support levels may trigger additional technical selling, potentially pushing prices towards $… before eventually testing the psychologically important $… mark. On the upside, the daily high at $… has become a crucial resistance level that needs to be cleared to confirm that traders are actively buying the current dip. Additional hurdles are located at $… (key resistance) and $… (major resistance), with the latter representing a measured move target based on the recent range expansion. Meanwhile, speeches by influential FOMC members will be closely monitored for additional insights on potential policy easing in 2025, likely influencing USD demand and creating trading opportunities around the XAU/USD pair.
