Gold (XAU) Pulls Back from Weekly High as Trade Tensions Ease Temporarily

Gold (XAU/USD) retreats slightly from its one-week peak but maintains a position above the crucial $2,900 level as investors respond to temporary easing in US-Canada-Mexico trade tensions.

XAU/USD Faces Pressure as Risk Appetite Improves

Gold (XAU/USD) experienced a moderate selloff during Thursday's European morning session, though buyers defended the psychologically important $2,900 mark. The precious metal's retreat coincides with the White House's announcement of a one-month compliance extension for US automakers regarding tariffs imposed on Mexico and Canada, which temporarily boosted market risk sentiment.

This concession in the ongoing trade disputes has momentarily diverted flows from safe-haven assets like gold. However, analysts note that the downturn lacks substantial fundamental catalysts and may prove short-lived, given the broader economic and geopolitical landscape.

Global Trade War Concerns Continue to Support Gold (XAU)

Despite the intraday pullback, gold (XAU) maintains underlying strength as investors remain deeply concerned about US President Donald Trump's aggressive tariff policies and the increasing risk of a full-scale global trade war. Market participants are particularly focused on Trump's first congressional address, where he warned that "reciprocal tariffs" would follow on April 2, suggesting further escalation in trade tensions.

The implementation of Trump's 25% tariffs on most imports from Mexico and Canada took effect on Tuesday, alongside the doubling of duties on Chinese goods to 20%. These measures have already triggered retaliatory actions, with Canada announcing counter-tariffs against more than $100 billion worth of US products, while China imposed tariffs of up to 15% on various US agricultural exports.

XAU/USD Finds Support in Weakening Dollar and Rate Cut Expectations

The gold (XAU) price continues to find support from a weakening US dollar, with the USD Index (DXY) dropping to its lowest level since December 2024 during Thursday's Asian session. This dollar weakness provides tailwinds for the precious metal, as gold is typically priced in dollars and benefits when the currency depreciates.

Additionally, market sentiment is increasingly leaning toward the possibility that Trump's tariff policies could significantly slow US economic growth, potentially forcing the Federal Reserve to implement multiple interest rate cuts before the end of 2025. These expectations were reinforced by Wednesday's Automatic Data Processing (ADP) report, which revealed that US private sector employment grew by just 77,000 in February, falling well short of the 140,000 forecast.

Technical Outlook for Gold (XAU) Remains Cautiously Positive

From a technical perspective, gold (XAU/USD) maintains a generally positive outlook despite the current pullback. Momentum beyond the immediate resistance at $2,934 could potentially propel the precious metal back toward its all-time peak of approximately $2,956, reached in February. A breakthrough above this level would likely serve as a fresh trigger for bullish traders and potentially extend the multi-month uptrend, supported by positive oscillators on the daily chart.

However, traders should note that the current lack of follow-through buying warrants some caution before taking strong bullish positions. Any corrective decline could find support near the $2,900 mark, with buyers likely to emerge at this level. More substantial selling pressure could open the path to deeper losses toward the $2,884-2,883 intermediate support zone and potentially toward the $2,860-2,858 horizontal support level if weakness persists.

Market Focus Shifts to US Employment Data

Investors are now turning their attention to the usual Weekly Initial Jobless Claims data from the US for additional market guidance, though the primary focus remains on Friday's US Nonfarm Payrolls report. This critical employment data will provide further insights into the health of the US labor market and could significantly influence expectations regarding the Federal Reserve's monetary policy trajectory.

Meanwhile, activity in the US service sector continued to expand at an accelerating pace in February, though this positive economic indicator did little to inspire dollar bulls amid broader concerns about trade tensions and their potential economic impact.

Outlook: XAU Selloffs Likely to Attract Buying Interest

Market analysts suggest that any further declines in gold (XAU) prices should be viewed as potential buying opportunities, particularly near the $2,900 psychological level. The combination of global trade uncertainties, a weakening dollar, and expectations for potential Fed rate cuts continues to provide fundamental support for the precious metal.

As long as these factors remain in play, gold's medium-term outlook appears to remain tilted to the upside, with temporary pullbacks offering strategic entry points for investors looking to maintain or increase their exposure to the safe-haven asset amid growing global economic uncertainties.