Gold (XAU/USD) prices seesawed between modest gains/minor losses through the first half of the European session on Tuesday (February 4) as it remained close to its all-time tops touched the previous day. US President Donald Trump's decision to temporarily suspend tariffs on Mexico and Canada, after reaching a border security deal with the two countries, boosted investor confidence. The risk-on flow, along with the Federal Reserve's (Fed) hawkish pause, provided a modest lift to the US Treasury bond yields and helped the US Dollar (USD) regain some positive traction after the previous day's U-turn. This, in turn, was seen acting as a headwind for the commodity.
The intraday downtick, however, stalled ahead of the $2,800 mark amid concerns about the potential economic impact of US President Donald Trump's trade tariffs, which continued to lend support to the safe-haven Gold prices. Further, expectations that Trump's protectionist policies will lead to higher US inflation turned out to be another factor that benefitted the XAU/USD's status as a hedge against rising prices and helped limit the downside. This, in turn, suggests that the path of least resistance for the bullion remains upwards and any correction in the future might still be seen as a buying opportunity, warranting caution for aggressive bearish traders.
From a technical perspective, the Relative Strength Index (RSI) is already flashing slightly overbought conditions on the daily chart. This makes it prudent to wait for some near-term consolidation or a modest correction before the next leg up. That said, any corrective slide below the immediate support of $2,800 might still be seen as a buying opportunity and remain limited near the $2,773-2,772 horizontal resistance breakout point. However, some follow-through selling could pave the way for a further decline towards the $2,755 zone en-route the $2,725-2,720 region and the $2,700 cap.
On the flip side, investors are likely to take a breather near the $2,830 area, or the record high touched on Monday. However, some follow-through buying would be the beginning of a continuation of the well-established trend seen from the December swing low, around the $2,583 area.(Newsmaker)
Source: FXstrett
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