Gold Faces Pressure Amid Strong US Dollar and Trade Uncertainty

Gold (XAU) prices dropped from the resistance band of $2,950-$3,000 last week and reached the support level of $2,850. This decline was driven by concerns over US trade policies and economic uncertainty. The announcement of tariffs on Mexico, Canada, and China increased fears of a prolonged trade conflict, reducing investor optimism. As a result, gold extended its losses, with traders hesitating to enter new positions until more clarity emerges.

Moreover, the strength of the US dollar has added further pressure on gold, as the US Dollar Index broke above the key 107 level. Recession fears intensified after the release of Core PCE data. The Core PCE Price Index showed that inflation is gradually approaching the Fed’s 2% target, increasing expectations of future rate cuts. Market projections indicate a 70 basis point rate cut this year, with the first reduction expected in June. Additionally, the Atlanta Fed GDPNow model forecasts an economic contraction of -1.5% in Q1 2025, further raising concerns about economic stability.

Despite the market downturn, bullish price action emerges as long-term trends remain bullish. The positive price action in US Treasury yields in 2024 has increased market uncertainty. With ongoing trade tensions and economic risks, investors will closely monitor upcoming developments before making significant moves in the gold market. The market awaits the release of the nonfarm payroll data this week, which will provide further guidance to the US Dollar Index and the gold market.

Gold (XAU) Technical Analysis

Gold Daily Chart – Price Correction

The daily chart for gold shows that the price is correcting from the resistance area of $2,950 and has reached the midline of the ascending channel. The key support level is $2,800, where the green support line and the 50-day SMA converge. The RSI has hit the mid-level, indicating a potential short-term rebound. Despite the strong price correction, the overall trend remains bullish, and this pullback will likely present a buying opportunity for the next move.

Gold 4-Hour Chart – Broadening Wedge Support

The 4-hour chart for gold shows that the price has reached an oversold level not seen since December 2024. Therefore, a rebound from these levels is possible. The support at $2,830 is reinforced by the support line of the broadening wedge. This line also serves as the neckline of the inverted head and shoulders pattern formed in the first week of February.

Treasury Yields (TNX) Technical Analysis

10-Year Treasury Note Yield Daily Chart – 200-Day SMA Support

The daily chart for US Treasury yields shows that yields are correcting and have reached the strong support level of 4.24%. This support is also reinforced by the 200-day SMA. A break below this level would indicate further negative momentum. The immediate support in case of a decline is at 4.10%, where the next rebound could develop. The RSI is approaching the oversold level, suggesting that a rebound may occur soon.

10-Year Treasury Note Yield 4-Hour Chart – Correction

The 4-hour chart for US Treasury yields shows that yields have breached the ascending channel and are approaching the nearest support at 4.10%. The RSI is oversold, indicating the potential for a rebound. A drop in yields to 4.10% may result in a strong rebound.

US Dollar (DXY) Technical Analysis

UD Dollar Daily – Positive Development

The daily chart for the US Dollar Index shows that the price rebounded back above the key 107 level after a few days of consolidation. The strong price rebound on the last day of February created a wick on the monthly candle for February. This price action indicates that bullish momentum in the US dollar remains, and further upside is likely.

US Dollar 4-Hour Chart – Positive Development

The 4-hour chart for the US Dollar Index shows that the index has rebounded higher after breaking out of the falling wedge pattern. This breakout has opened the door for a move toward the 109.60 level. However, the index must break above 108 at the black trend line to go further upside.