By Rania Gule, Senior Market Analyst at XS.com – MENA
Gold is currently experiencing notable volatility, with prices touching levels near $3,400 per ounce before retreating slightly at the start of trading on Tuesday. This pullback does not necessarily reflect a weakening of bullish momentum, but rather a short technical pause in an overall upward trajectory still fueled by several key factors, most notably escalating trade tensions, geopolitical developments, and potential shifts in U.S. Federal Reserve policy. In my view, gold continues to hold strong appeal as a hedging asset, and the current declines may represent medium-term buying opportunities rather than the start of a downward reversal.
The pivotal event sparking fresh market anxiety was former President Donald Trump’s announcement of plans to double tariffs on steel and aluminium imports to 50%, a move that has reignited fears of a full-blown trade war with China and potentially other trading partners. Markets are not only reacting to the numbers but also to the political messaging behind such actions—this is where the real risk lies. The uncertainty surrounding international trade relations is naturally boosting demand for gold as a safe-haven asset, even if prices temporarily dip due to fluctuations in the U.S. dollar.
Simultaneously, gold is benefiting from renewed weakness in the U.S. dollar, which recently fell to a six-week low before staging a technical rebound driven by profit-taking. However, this dollar recovery appears fragile, given ongoing pressure on U.S. monetary policy and growing concerns over the federal fiscal outlook amid expectations of upcoming rate cuts. Any further decline in U.S. Treasury yields would provide gold with another leg higher, especially as markets increasingly price in at least two rate cuts by the Fed in 2025.
Technically, gold’s breakout above a key resistance level on the daily chart, supported by bullish RSI momentum, reinforces the validity of the uptrend. While a pullback below $3,400 might appear bearish in the short term, the broader price behaviour still suggests a clear intent by the market to push toward new record highs, driven by a mix of political, financial, and economic tensions. This breakout should not be underestimated—it may mark the beginning of an accelerated rally if fundamental conditions remain aligned.
Beyond trade disputes, geopolitical tensions are also playing a role. The ongoing stalemate in peace negotiations between Russia and Ukraine continues to add a layer of global risk. While these developments may seem distant from financial centres, they have a direct impact on global investor sentiment and further bolster gold’s safe-haven appeal. This factor cannot be overlooked, especially amid the West’s hesitant stance toward escalation.
At the same time, markets are increasingly convinced that the Fed is leaning toward monetary easing in the second half of the year. Recent comments from FOMC members indicate that a rate cut remains on the table, despite concerns about the tariffs’ potential inflationary impact. The Fed appears to be adopting a “cautious” approach, but sustained weakness in economic data, particularly in the labour market, could force its hand. In this context, upcoming JOLTS and Non-Farm Payrolls (NFP) reports will be critical in determining the next move for the dollar—and by extension, gold.
Therefore, I believe the current gold pullback is not a fundamental shift in trend, but rather an opportunity for gradual accumulation ahead of a potential bullish leg that could surpass $3,450 in the coming weeks, especially if U.S. labour data falls short of expectations. Markets are now responding to a blend of trade fears, geopolitical instability, and monetary uncertainty—all of which historically provide fertile ground for gold strength.
In conclusion, gold appears to be on the verge of a new phase of gains, supported by deeply rooted fundamentals unlikely to fade in the near term. Trade tensions, the prospect of rate cuts, a weakening dollar, and rising geopolitical risks together form a classic recipe for a gold rally. As such, current pullbacks should be seen as opportunities, not as signs of the end of the bullish trend. Gold continues to shine in a world torn between trade, monetary, and political conflicts, with new highs still well within reach.