Early Tuesday, gold prices are consolidating around the crucial $2,900 mark. This price point is proving pivotal as the market reacts to a complex interplay of economic indicators and geopolitical tensions. The Relative Strength Index (RSI) has edged slightly lower but remains comfortably above the 50 level, suggesting that bullish momentum is still intact. The 21-day Simple Moving Average (SMA) at $2,900 is acting as a critical juncture for gold's price trajectory.
The gold market is closely monitoring this $2,900 level as it represents a significant threshold. Should the price manage to close above this level on a daily candlestick basis, it could pave the way for further gains. The next major resistance awaits at the all-time high of $2,956. Conversely, if gold experiences additional declines, it could test the $2,800 round number.
Gold's latest upward move has stalled at the 21-day SMA, reinforcing its importance as a technical barrier. Analysts suggest that a recovery in gold prices will gain momentum only if this level is breached convincingly. Meanwhile, economic uncertainties in the United States are adding layers of complexity to the market dynamics.
US recession fears have weighed heavily on investor sentiment, leading to a tech stock sell-off on Wall Street on Monday. The panic was amplified by new tariffs on Canada and Mexico set to be implemented on Tuesday. In response, both China's Commerce Ministry and the Canadian Prime Minister's office announced retaliatory tariffs against the United States, escalating a tit-for-tat trade scenario.
This heightened trade tension comes amidst broader economic concerns in the US. The Atlanta Federal Reserve's GDP tracker has reported a sharp decline, now standing at -2.8%, after experiencing a dramatic 5% drop over just two business days. These developments have put additional pressure on the US dollar and Treasury yields.
As a result, US Treasury bond yields have plunged to their lowest levels in five months. This decline has inadvertently provided some support for gold prices, allowing them to edge back toward the $2,900 threshold. The weakening dollar typically boosts gold prices as it makes the metal cheaper for holders of other currencies.
Further compounding concerns is the recent decision by US President Donald Trump to pause military aid to Ukraine after a contentious Oval Office meeting with Ukrainian President Volodymyr Zelensky. This geopolitical maneuver adds another layer of uncertainty that may influence gold's safe-haven appeal.
The latest US manufacturing data adds to the gloomy outlook. The US ISM Manufacturing PMI fell to 50.3 in February from 50.9, missing market expectations of 50.8. This indicator further underscores concerns about slowing economic activity in the world's largest economy.