Gold price flat lines above $3,100; downside seems limited amid US tariff worries
Gold price (XAU/USD) hangs near the lower end of its daily range during the early European session on Wednesday, though it manages to hold above the $3,100 mark amid persistent safe-haven demand. The uncertainty over US President Donald Trump's aggressive trade policies and their impact on the global economy, along with geopolitical tensions, continue to act as a tailwind for the bullion.
Meanwhile, expectations that the Federal Reserve (Fed) will resume its rate-cutting cycle soon in the wake of a tariff-driven US economic slowdown fail to assist the US Dollar (USD) to attract any meaningful buyers. This, in turn, could further underpin the non-yielding Gold price. Traders, however, seem reluctant and opt to wait on the sidelines ahead of Trump's reciprocal tariffs announcement.
Gold price draws support from tariff-related uncertainties
Investors remain worried about the potential economic fallout from US President Donald Trump's trade policies, which assists the safe-haven Gold price to regain positive traction following the overnight pullback from a fresh all-time peak.
The recent US macro data pointed to still sticky inflation and slowing economic growth, implying that the economy could be heading towards stagflation, which might force the Federal Reserve to resume its rate-cutting cycle in June.
The concerns were fueled by the disappointing US ISM Manufacturing Purchasing Managers Index (PMI) on Tuesday, which fell from 50.3 to 49 in March and indicated that business activity contracted for the first time in three months.
The report also revealed that inflation at the factory gate jumped to the highest level in nearly three years and the Employment Index highlighted a decrease in the sector's payrolls at an accelerating pace during the reported month.
Adding to this, the Job Openings and Labor Turnover Survey (JOLTS) showed that the number of job openings on the last business day of February stood at 7.56 million, down from 7.76 million reported in the previous month.
According to the CME Group's FedWatch Tool, the markets are currently pricing in the possibility that the Fed would cut rates by 80 basis points this year, undermining the US Dollar and further benefiting the non-yielding yellow metal.
Asian equity markets tracked the overnight gains on Wall Street, which, along with overbought conditions, might hold back the XAU/USD bulls from placing fresh bets ahead of Trump's impending reciprocal tariffs announcement.
In the meantime, the release of the US ADP report on private-sector employment and Factory Orders data might influence the USD, which could provide some impetus to the precious metal later during the early North American session.
Source: Fxstreet
