Gold (XAU) Price Forecast: Bullish Momentum Builds as Trade War Fears Intensify

Gold Prices Hold Near Record Highs With $3,000 in Sight as Trade War Concerns Mount

Gold prices edged higher on Friday, trading just below the record high of $2,942.78 set earlier in the week. A breakout above this level would reinforce the uptrend, leaving $3,000 as the next psychological target. On the downside, key support sits at $2,888.52, with a drop below $2,864.33 potentially triggering a deeper correction.

At 12:19 GMT, XAU/USD is trading $2932.74, up $4.41 or +0.15%.

Safe-Haven Demand Strengthens on Trade War Uncertainty

Gold remains on track for a seventh consecutive weekly gain as concerns over a potential global trade war continue to drive safe-haven demand. U.S. President Donald Trump’s push for reciprocal tariffs has fueled investor uncertainty, supporting bullion prices.

Trump has directed his economic team to draft plans for retaliatory tariffs on countries that impose taxes on U.S. imports. This move, seen as inflationary, could further boost gold’s appeal as a hedge against price pressures and geopolitical instability. Nicholas Frappell, global head of institutional markets at ABC Refinery, noted that ongoing uncertainty surrounding U.S. trade and foreign policy remains a key driver for gold.

Inflation Data and Fed Rate Expectations Under Scrutiny

The latest U.S. Producer Price Index (PPI) report showed wholesale prices rising 3.5% year-over-year in January, with a monthly increase of 0.4%, exceeding market expectations of 0.3%. This followed a hotter-than-expected Consumer Price Index (CPI) report earlier in the week, adding to concerns over persistent inflation.

Despite these figures, traders anticipate that the Federal Reserve will hold off on cutting interest rates until at least September. A decline in jobless claims has reinforced expectations of a resilient labor market, giving the Fed little urgency to adjust policy in the near term. Investors are now looking ahead to retail sales data and the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, for further clarity on inflation trends.

Physical Gold Demand Weakens as Prices Surge

Retail gold demand in key markets like India and China has softened as record prices deter buyers. Indian jewelers have been forced to offer discounts to attract customers, while Chinese demand remains subdued following the Lunar New Year holidays. The lack of strong physical buying could limit upside momentum in gold’s rally.

Treasury Yields Hold Steady as Market Awaits Further Data

U.S. Treasury yields remained largely unchanged on Friday as investors weighed inflation data and awaited key economic reports. While inflation remains elevated, some elements of the latest PPI and CPI reports suggest a potentially softer reading for the upcoming PCE index.

Market sentiment was also shaped by Trump’s executive order on reciprocal tariffs. Although investors took some relief from the fact that immediate levies were not imposed, concerns over long-term trade tensions persist. Mark Malek, chief investment officer at Siebert, warned that the market remains in a state of uncertainty, with traders still assessing the potential impact of Trump’s latest trade policy moves.

Gold Prices Forecast: Bullish Momentum Holds, but Caution Warranted

Gold’s short-term outlook remains bullish, with the $3,000 level in view if safe-haven demand continues. However, resistance at $2,942.78 must be breached for further upside.

The Federal Reserve’s reluctance to cut rates, combined with persistent inflation concerns, keeps gold supported. Treasury yields staying firm signal that the bond market is not yet pricing in imminent rate cuts, which could cap gold’s gains in the near term. Additionally, weaker physical demand from key buyers may act as a headwind.

For now, gold remains well-positioned, but traders should watch for potential pullbacks if inflation pressures ease or Treasury yields start climbing.

More Information in our Economic Calendar.