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Gold uptrend remains uninterrupted; overbought RSI warrants caution for bulls

  • Gold price continues to attract safe-haven flows amid worries about Trump’s trade tariffs. 
  • Fed rate cut bets undermine the USD and lend additional support to the XAU/USD pair.
  • The risk-on environment warrants some caution for bulls amid a slightly overbought RSI. 

Gold price (XAU/USD) continues scaling new record highs through the first half of the European session on Wednesday as US-China trade war fears continue to boost demand for the traditional safe-haven bullion. Apart from this, some follow-through selling around the US Dollar (USD), led by bets that the Federal Reserve (Fed) will keep cutting interest rates in 2025, turn out to be another factor driving flows toward the non-yielding yellow metal.

Meanwhile, bulls seem rather unaffected by a positive risk tone, which remains supported by US President Donald Trump’s decision to delay tariffs against Canada and Mexico and tends to undermine the Gold price. This, in turn, suggests that the path of least resistance for the XAU/USD remains to the upside. That said, slightly overbought conditions on the daily chart might cap further gains as traders now look to the US macro data for a fresh impetus. 

Gold price remains well supported by US-China trade war fears, weaker USD

  • China retaliated to US President Donald Trump’s new duties and imposed targeted tariffs on US imports, fueling trade war fears between the world’s top two economies and lifting the safe-haven Gold price to a fresh record high on Wednesday. 
  • The Job Openings and Labor Turnover Survey (JOLTS) published by the US Bureau of Labor Statistics on Tuesday showed that the number of job openings on the last business day of December stood at 7.6 million, down from 8.09 million previous. 
  • The data pointed to a slowdown in the job market, which could allow the Federal Reserve to cut rates further. This keeps the US Dollar bulls on the defensive near the weekly low and turns out to be another factor that benefits the XAU/USD pair. 
  • Trump offered concessions to Canada and Mexico by delaying the 25% trade tariffs for 30 days, fueling hopes that a global trade war could be averted, though it does little to dent the bullish sentiment around the safe-haven precious metal.
  • Wednesday’s US economic docket features the release of the ADP report on private-sector employment and ISM Services PMI. The data should influence the USD and produce short-term trading opportunities around the commodity.
  • The focus, however, will remain on the closely-watched US monthly employment detail – popularly known as the Nonfarm Payrolls (NFP) report on Friday. Apart from this, tariff headlines should infuse volatility in the markets. 

Gold price needs to consolidate before the next leg up amid overbought RSI

From a technical perspective, the Relative Strength Index (RSI) on hourly and daily charts is flashing slightly overbought conditions, warranting some caution for bullish traders. That said, the recent breakout momentum beyond the $2,800 mark suggests that the path of least resistance for the Gold price remains to the upside. This, in turn, supports prospects for an extension of the recent well-established uptrend from the December 2024 swing low. 

In the meantime, any corrective slide now seems to find some support near the $2,830 area ahead of the $2,800 mark. A further decline could be seen as a buying opportunity and is more likely to remain limited near the $2,773-2,772 horizontal resistance breakpoint, now turned support. A convincing break below the latter, however, might prompt some technical selling and pave the way for deeper losses.

Interest rates FAQs

US-China Trade War FAQs

Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.

An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.

The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.