The recent release of the US S&P Global business PMI data has sparked renewed concerns regarding the health of the American economy. The data has bolstered the probability of two interest rate cuts by the Federal Reserve this year. As a result, gold prices are capturing attention, particularly as they retreat slightly from record highs but remain robustly positioned for a potential upswing. With the 14-day Relative Strength Index (RSI) hovering near 70, gold is situated firmly within a bullish zone, suggesting that buyers may soon resume their uptrend. Meanwhile, geopolitical developments, including US trade policies and strained international relations, continue to underpin the precious metal's market dynamics.
In Asian trading on Tuesday, the AUD/USD pair hovers defensively around 0.6350, with the US Dollar rebounding amid follow-through buying. This currency movement comes as US President Donald Trump's administration contemplates stricter export controls on Nvidia chips to China, further exacerbating trade tensions. These actions are contributing to an environment where gold buyers are momentarily pausing before potentially resuming an upward trajectory amid trade war fears.
On the interest rate front, the US Treasury bond yields have been losing ground, aligning with investor expectations of forthcoming Fed rate cuts. These expectations are driven by the weak PMI data and broader economic uncertainty. Consequently, gold has become an attractive hedge against these economic risks, with its price closing above the $2,950 barrier. Analysts foresee more upside potential with key resistance levels at $2,970 and the significant psychological threshold of $3,000.
Despite a minor retreat from the record high of $2,956, the gold price is likely to catch a fresh bid on dips, given its current bullish technical setup. The immediate support is identified at the previous day's low of $2,921, providing a cushion for any downward pressure. The lack of progress in the second round of US-Russia peace talks aimed at resolving the Ukraine conflict also supports gold's appeal as a safe-haven asset amidst geopolitical instability.
Adding to the international tension, President Trump announced that sweeping US tariffs on imports from Canada and Mexico "will go forward" once a month-long delay expires next week. This decision could potentially strain trade relations further and influence global market sentiment.