Gold price continues to attract safe-haven flows on the back of trade war fears.
Fed rate cut bets and depressed US bond yields also support the XAU/USD pair.
Subdued USD price action favors bulls ahead of Friday’s crucial US NFP report.
Gold price (XAU/USD) regains positive traction following the previous day's modest slide and remains within striking distance of the all-time peak during the Asian session on Friday. Escalating US-China trade tensions, along with concerns about the potential economic fallout from US President Donald Trump’s aggressive trade policies, continue to underpin demand for the safe-haven bullion.
Meanwhile, bets that the Federal Reserve (Fed) would keep cutting rates in 2025 keep the US Treasury bond yields depressed near their lowest level since December. This fails to assist the US Dollar (USD) in attracting any meaningful buyers and also lends support to the non-yielding Gold price. Traders now look forward to the release of the US Nonfarm Payrolls (NFP) report for a fresh directional impetus.
Gold price remains close to record high amid trade jitters, ahead of US NFP report
China announced tariffs on some US goods in retaliation to US President Donald Trump's 10% levy on Chinese imports. This marks a new trade war between the world's top two economies and continues to underpin the safe-haven Gold price.
On the economic data front, the US Department of Labor (DoL) reported on Thursday that the number of US citizens filing new applications for unemployment insurance rose to 219K for the week ending February 1, from the previous week's revised tally of 208K.
US Treasury Secretary Scott Bessent said on Thursday that the Trump administration was not particularly concerned about the Federal Reserve's trajectory on interest rates and that the focus is on bringing down 10-year Treasury yields.
The yield on the benchmark 10-year US government bond fell to its lowest level since December 12 earlier this week amid bets that the Federal Reserve will cut rates twice by the end of 2025, further benefitting the non-yielding yellow metal.
Chicago Fed President Austan Goolsbee noted that the appearance that inflation has stalled is largely due to base effects and that the central bank needs to be mindful of overheating and deterioration, but things are largely going well.
Dallas Fed President Lorie Logan said that inflation progress has been significant, but the US labor market remains far too firm to push the central bank into rate cuts any time soon. This, however, does little to impress the US Dollar bulls.
Market participants now look forward to the US Nonfarm Payrolls report, which is expected to show that the economy added 170K jobs in January compared to 256K in the previous month and the Unemployment rate held steady at 4.1%.
The crucial data will influence market expectations about the Fed's interest rate outlook, which, in turn, should play a key role in driving the USD demand in the near term and determining the next leg of a directional move for the XAU/USD.
Gold price needs to consolidate before traders start positioning for additional gains
From a technical perspective, the overnight bounce and the subsequent move up on Friday validates the near-term positive outlook for the Gold price. That said, the Relative Strength Index (RSI) is flashing slightly overbought conditions on the day chart and warrants some caution for bullish traders. Hence, it will be prudent to wait for some near-term consolidation before positioning for an extension of the recent well-established uptrend from the December monthly trough.
In the meantime, the $2,855 horizontal zone, followed by the overnight swing low, around the $2,834 region, could offer some support to the Gold price ahead of the $2,815-2,714 region. This is followed by the $2,800 mark, which if broken decisively might prompt some technical selling and drag the XAU/USD towards the $2,773-2,772 resistance breakpoint. The latter coincides with the weekly low and a convincing break below should pave the way for a deeper corrective decline.
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