Gold (XAU) Retreats from Fresh Record High Amid Improved Risk Appetite

Gold prices have pulled back from their new all-time high reached earlier Monday, trading around $3,220 as positive sentiment in equity markets encourages profit-taking, though the precious metal's overall bullish outlook remains intact amid escalating US-China trade tensions.

Gold (XAU) Faces Mild Correction as Market Sentiment Improves

Gold price (XAU/USD) has eased from its fresh record high touched earlier Monday, trading with a slight negative bias around the $3,220 area during the first half of the European session. The retreat comes as equity markets display a positive tone, prompting some profit-taking in the precious metal amid slightly overbought conditions on daily charts.

Despite this minor correction, any substantial downside appears limited given the sharp escalation in US-China trade tensions, which continues to provide underlying support for the safe-haven asset. The current geopolitical landscape has created a favorable environment for gold, reinforcing its status as a reliable store of value during periods of international economic uncertainty.

Gold (XAU) Supported by Expected Fed Rate Cuts and Weak Dollar

Investors now appear convinced that the Federal Reserve will resume its monetary easing cycle soon, with expectations of at least three interest rate cuts this year amid growing concerns about a tariffs-driven slowdown in the US economy. This outlook has kept the US Dollar depressed near its lowest level since April 2022, which in turn limits the downside potential for non-yielding gold.

Given these fundamentals, market participants view any subsequent price dips as potential buying opportunities, suggesting that corrections are likely to remain shallow. This dynamic warrants caution for traders considering bearish positions on the precious metal in the current environment.

Gold (XAU) Benefits from Escalating US-China Trade War

China increased its tariffs on US imports to 125% on Friday in retaliation for US President Donald Trump's decision to raise duties on Chinese goods to a combined 145%. This escalation in trade hostilities between the world's two largest economies has intensified market concerns about potential negative impacts on global economic growth, helping lift gold to its fresh all-time peak.

Meanwhile, an unusual spike in US Treasury yields indicates that investors may be dumping US government bonds amid weakening confidence in the American economy. This factor, combined with prospects for more aggressive policy easing from the Federal Reserve—bolstered by recent US consumer inflation data—continues to pressure the US Dollar and further benefits the yellow metal.

Gold (XAU) Outlook Supported by Inflation Hedge Status

The US Bureau of Labor Statistics reported last Thursday that the headline Consumer Price Index (CPI) fell 0.1% in March, with the yearly rate decelerating sharply to 2.4% from February's 2.8%. The core CPI, which excludes food and energy, rose just 0.1% month-over-month and reached 2.8% year-over-year for March, marking its lowest rate in nearly four years.

Traders are now pricing in 90 basis points of Fed rate cuts by the end of 2025, potentially driving additional flows toward non-yielding gold. Furthermore, market expectations that new tariffs will push inflation higher in coming months could further strengthen gold's appeal as a hedge against rising prices, supporting prospects for continued appreciation in the near term.

Market participants will closely monitor comments from key FOMC members this week, including Fed Chair Jerome Powell on Wednesday, for insights into the future rate-cut trajectory. Additionally, US monthly Retail Sales figures, also due Wednesday, will influence USD demand and potentially provide meaningful direction for the precious metal during the latter half of the week.

Gold (XAU) Technical Analysis Shows Strong Support Around $3,168-3,167

From a technical perspective, the daily Relative Strength Index (RSI) hovers just above the 70 mark, indicating slightly overbought conditions. This suggests that a period of consolidation or modest pullback might be prudent before traders position themselves for another upward movement in gold prices.

Any corrective decline is likely to find buyers near the psychologically important $3,200 level, which should help limit potential downside around the $3,168-3,167 region. This zone is expected to serve as strong support and represents a key pivot point for short-term traders looking to time their entries in the gold market.

Given the combination of favorable macroeconomic factors—including trade tensions, expected monetary policy easing, and inflation concerns—gold's near-term bias remains firmly tilted toward the bullish side, despite the current minor correction from record highs.