Gold price hits fresh record high as trade war fears continue to fuel safe-haven demand
Gold price (XAU/USD) hits a fresh all-time peak during the early European session on Thursday and confirms a breakout through a short-term trading range. US President Donald Trump's fresh threat to impose tariffs on imported goods dampens investors' appetite for riskier assets and continues to underpin demand for the safe-haven bullion. The global flight to safety triggers a downfall in the US Treasury bond yields, which, in turn, exerts some downward pressure on the US Dollar (USD) and further benefits the yellow metal.
Meanwhile, hawkish FOMC meeting minutes released on Wednesday reaffirmed market expectations for an extended pause on rates by the Federal Reserve (Fed). This could act as a tailwind for the US bond yields and the Greenback, which, in turn, might cap the upside for the non-yielding Gold price. Furthermore, slightly overbought conditions on the daily chart might further hold back traders from placing fresh bullish bets around the XAU/USD. Nevertheless, the fundamental backdrop supports prospects for a further appreciating move.
Gold price buying interest remains unabated amid rising global trade tensions
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
