Gold prices (XAU/USD) bounced back after an intraday dip to the $3,275-$3,274 range, fueled by a combination of geopolitical tensions and a slight pullback in the US dollar (USD). This has provided a lift to the precious metal, reviving its appeal as a safe-haven asset.
After hitting a low earlier in the session, gold has managed to reverse a two-day losing streak, though the upside potential remains limited. The optimism surrounding the US-UK trade deal, along with the upcoming US-China trade negotiations this weekend, is still supporting a positive risk tone in the markets. However, the Federal Reserve’s hawkish stance on interest rates could act as a cap on any significant decline in the dollar, which, in turn, may limit gold’s gains.
Market Movers: Safe-Haven Demand Revives Amid Geopolitical Tensions
The US Dollar retreated slightly on Friday after reaching a near one-month high, adding tailwinds to gold prices. This shift in the dollar’s strength coincided with rising geopolitical risks that have prompted investors to seek the safety of gold.
In particular, escalating tensions between Russia and Ukraine, Israel’s growing conflict with Iran-backed Houthis in Yemen, and fears of a broader military conflict along the India-Pakistan border have raised concerns in the global markets. These factors are contributing to the renewed demand for gold as a safe-haven asset.
The gold price also benefited from a modest USD pullback following an upbeat sentiment stemming from Thursday’s announcement of a limited US-UK trade deal. The deal, which keeps a 10% tariff on UK imports, was seen as a positive development for market sentiment. U.S. Commerce Secretary Howard Lutnick also indicated that multiple trade deals would be rolled out over the next month, although the tariffs on most countries will likely remain in place.
Additionally, reports suggest that the Trump administration is considering reducing tariffs on China from 145% to 50% in the coming week, further fueling optimism and adding pressure on gold prices.
Federal Reserve’s Hawkish Pause Limits USD Downturn
The Federal Reserve, in its latest meeting, signaled that it is unlikely to cut interest rates in the near term, despite mounting economic uncertainties. This stance has bolstered the dollar, though the currency retreated slightly on Friday, helping gold recover.
As investors await more guidance from key Federal Open Market Committee (FOMC) officials, Friday’s speeches will be closely monitored to gain further insights into the Fed’s approach to future rate cuts. These discussions could have a significant impact on the US dollar and provide new momentum for gold.
Technical Outlook: $3,360-$3,365 Resistance Key for Further Gains
From a technical standpoint, the XAU/USD pair remains under pressure after breaking through the $3,260 support-turned-resistance level and sliding below the $3,300 mark earlier on Friday. However, oscillators on the daily chart suggest caution, as they have yet to confirm a strong bearish bias. This implies that gold may find support around the $3,265-$3,264 region.
If gold sees further selling, the next support levels could come near $3,223-$3,222, followed by the $3,200 area, the swing low from last week. On the other hand, a rise above the $3,324 area, which marks the Asian session high, could bring gold closer to the $3,360-$3,365 resistance zone. Any movement beyond this range may push gold back towards the $3,400 mark, with the next hurdle around the $3,434-$3,435 zone.
