Gold (XAU) Price Forecast: Trade War Fears Drive Gold Rally; RSI Flashes Warning

Will Technical Warning Signs Trigger a Gold Selloff?

Gold retreated slightly on Thursday while staying within Wednesday’s range, as prices approach the all-time high of $2,790.17. The RSI reading of 67 suggests the metal is nearing overbought territory, with technical analysis indicating possible downside risk to $2,693.40. Traders are reducing positions ahead of next week’s crucial Fed meeting, signaling growing caution in the market. The current price action reflects a delicate balance between profit-taking and continued bullish sentiment.

At 12:37 GMT, XAU/USD is trading $2744.21, down $12.13 or -0.44%.

Can Trump’s Trade War Threats Supercharge Safe-Haven Buying?

Market attention has intensified following Trump’s proposed tariffs – 25% on Canadian and Mexican imports and 10% on Chinese goods starting February 1. The president also indicated potential European tariffs, though specifics remain unclear. These protectionist signals are strengthening gold’s traditional role as a hedge against economic uncertainty. The proposed trade barriers have already triggered increased safe-haven demand, with institutional investors reportedly boosting their gold positions.

Is the Fed Ready to Pivot on Interest Rates?

The Federal Reserve’s January 28-29 meeting approaches with markets pricing in a 96% probability of rates remaining unchanged, according to CME’s FedWatch Tool. Fed Governor Waller’s recent comments suggest multiple rate cuts may occur if inflation continues declining. Adding to market focus, both the Bank of Japan and ECB have critical policy decisions scheduled. The convergence of these central bank meetings has created heightened volatility expectations across precious metals markets.

How Will Key Economic Data Impact Treasury Markets?

Treasury yields held steady as investors await Trump’s World Economic Forum address and crucial economic indicators. Markets are closely monitoring upcoming initial jobless claims, S&P Global Composite PMI Flash, and December existing home sales figures for direction on economic health and monetary policy implications. These data points could significantly influence near-term trading patterns in both Treasury and gold markets.

Market Forecast

Gold appears positioned to test the $3,000 mark if Trump’s trade policies escalate global economic concerns. However, technical indicators suggest a near-term correction might precede further upside. The metal’s performance will likely hinge on next week’s Fed meeting outcome and the implementation details of the proposed tariffs. Traders should monitor the RSI for potential overbought signals while maintaining focus on central bank decisions, particularly as multiple policy meetings coincide with escalating trade tensions.

More Information in our Economic Calendar.