Gold price (XAU/USD) sticks to its positive bias through the Asian session on Thursday and currently trades around the $2,944 area, just below the all-time peak touched the previous day. Worries that US President Donald Trump's tariffs on imported goods could spark a global trade war weigh on investors sentiment and underpin demand for the safe-haven bullion. Moreover, flight to safety triggers a fresh leg down in the US Treasury bond yields and further benefits the non-yielding yellow metal.
Meanwhile, declining US bond yields fail to assist the US Dollar (USD) to capitalize on this week's modest bounce from a two-month low. This, in turn, acts as a tailwind for the USD-denominated commodities and lends additional support to the Gold price. That said, expectations for an extended pause on rates by the Federal Reserve (Fed), bolstered by hawkish FOMC minutes released on Wednesday, could cap the XAU/USD amid slightly overbought conditions on the daily chart.
Gold price draws support from flight to safety amid global trade war fears
US President Donald Trump said on Wednesday that he will announce heavy tariffs on a number of products next month or even sooner, raising the risk of a further escalation of trade tensions and underpinning the safe-haven Gold price.
US Commerce Secretary Howard Lutnick said in a Fox News interview that Trump's goal is to abolish the Internal Revenue Service and let all the outsiders pay. Meanwhile, Trump said that a new trade deal with China is possible.
The US Dollar struggles to capitalize on its modest recovery gains registered over the past two days amid a fresh leg down in the US Treasury bond yields and turns out to be another factor lending additional support to the precious metal.
Minutes from the last FOMC policy meeting held in January released on Wednesday revealed officials noted a high degree of uncertainty that requires the central bank to take a careful approach in considering any further interest rate cuts.
Fed Vice Chairman Philip Jefferson said that the US economic performance has been quite strong, the US labor market is solid, inflation has eased but is still elevated, and the path back to the 2%
inflation target could be bumpy.
Chicago Fed President Austan Goolsbee said that inflation has decreased but it is still excessive and once inflation falls, rates can fall more. This, however, fails to impress the USD bulls or influence the non-yielding yellow metal.
Thursday's US economic docket features the usual Weekly Initial Jobless Claims and the Philly Fed Manufacturing Index. This, along with speeches by influential FOMC members, could drive the USD and the XAU/USD pair.
The market focus will then shift to the release of flash global PMIs on Friday, which should provide a fresh insight into the global economic health and provide some meaningful impetus to the safe-haven commodity.
Source: Fxstreet
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