The gold market finds itself in a precarious position as the XAU/USD consolidates with a mild negative bias just above the $2,760 mark during the Asian session on Wednesday. Investors are navigating a landscape marked by positive risk tones yet troubled by the potential economic implications of US President Donald Trump's proposed tariffs. The tariffs, targeting imported computer chips, pharmaceuticals, aluminum, steel, and copper, have raised concerns about a new wave of global trade wars. Meanwhile, the yield on the benchmark 10-year US government bond remains near a one-month low, offering some support to the non-yielding yellow metal.
Despite these concerns, the gold price remains relatively stable, trading within a narrow band due to mixed fundamental cues. The decline in US Treasury bond yields has limited the US Dollar's recovery, thus providing some tailwind for gold. However, traders appear hesitant to make significant bets ahead of the Federal Open Market Committee (FOMC) policy decision, opting instead to wait for clearer signals from this critical central bank event risk.
Investors are particularly wary of the downside risks associated with President Trump's tariff threats. These measures are intended to encourage companies to ramp up production within the United States but could inadvertently spark a fresh wave of global trade conflicts. In such a scenario, gold is positioned as a safe-haven asset, potentially benefiting from increased market volatility and risk aversion.
The US Census Bureau reports that Mexico has emerged as the top exporter in this context, with exports valued at $466.6 billion. This development highlights the intricate dynamics of global trade that could be disrupted by new tariff policies.
From a technical standpoint, recent developments suggest that the path of least resistance for gold remains to the upside. The breakout through the $2,720-2,725 horizontal barrier and positive oscillators on the daily chart signal potential bullish momentum. If the gold price sustains its strength beyond the $2,800 mark, it could trigger renewed interest among bullish traders, further extending the upward trend observed over the past month.
Moreover, a move beyond the $2,772-2,773 area would reinforce a constructive outlook for gold prices, potentially lifting XAU/USD beyond $2,786—a level not seen since October 2024. Such a move could propel gold towards its all-time peak near the $2,790 zone.
The gold market's current state reflects a balance between multiple opposing forces. On one hand, sliding US bond yields and subdued USD price action provide some support for gold prices. On the other hand, concerns about potential trade wars and upcoming FOMC policy decisions add layers of complexity to market dynamics.