Gold: Geopolitical Tensions Keep Prices Afloat, but Fed Signals Could Shift Moment

Gold Declines, but Geopolitical Tensions Support its Price

The gold (XAU/USD) price declined by 0.68% on Friday as traders took profit on their long positions. The US Dollar Index (DXY) moved higher, making bullion more expensive for holders of other currencies.

Despite a sizeable drop on Friday, XAU/USD still managed to gain over 1% by the end of the week due to strong safe-haven flows induced by geopolitical and economic uncertainties.

"Ongoing safe-haven demand, both based on trade concerns and geopolitical risks, continues to be the primary driving force", said Peter Grant, vice president and senior metals strategist at Zaner Metals.

Last week, the White House confirmed that US President Donald Trump plans to introduce new reciprocal tariff rates on 2 April. This is despite earlier comments from Treasury Secretary Scott Bessent indicating a possible tariff activation delay. Increased trade tariffs could lead to higher consumer prices and spark a worldwide economic downturn.

Meanwhile, after two months of relative calm, Israel resumed full-scale air and ground attacks on Hamas in Gaza. The government cited the need to pressure for hostage releases. Gold is traditionally viewed as a safe-haven investment during times of geopolitical and economic uncertainty. It performs well when investors seek to secure capital and flock to gold's stability amidst volatile market conditions and fluctuating currency values.

XAU/USD fell slightly during the Asian and early European trading sessions. Today, the main focus is on the Purchasing Managers' Index (PMI) reports released by S&P Global, an American financial information and analytics company. The reports provide crucial insights into global economies' health and future monetary policy trajectories. The US PMI report at 1:45 p.m. UTC will likely be the most impactful. Higher-than-expected figures may lower the chances of additional rate cuts by the Federal Reserve, pushing XAU/USD below $3,000. Conversely, lower-than-expected results may extend the general bullish trend and pull the pair towards $3,060.

Possible Trade Tariffs and Dovish Fed Put Bearish Pressure on Euro

The euro (EUR/USD) lost 0.34% against the US dollar (USD) on Friday. Traders decided to exit their long EUR/USD positions ahead of the 2 April tariff deadline.

EUR/USD has increased by over 7% since mid-January as worries over the US economic growth under the Trump administration's trade policies pressured the greenback. German Parliament passed a reform of the country's borrowing rules and a €500-billion fund to revamp its infrastructure and revive Europe's largest economy. This development also supported the euro. 'It's really been a huge rally in EUR/USD this quarter so, naturally, we're seeing some profit-taking ahead of the 2 April tariff deadline', said George Vessey, lead FX and macro strategist at Convera. 'While it is impossible to know exactly what the administration has in mind for its next move, our base case remains that tariff rates are likely to go up significantly and that this will drive a rebound in the US dollar', Jonas Goltermann, deputy chief markets economist at Capital Economics said in a note.

At the same time, the US Federal Reserve (Fed) indicated last week that it was in no rush to cut interest rates. These comments strengthened the greenback and pushed EUR/USD lower.

"We're not going to be in any hurry to move", Fed Chair Jerome Powell said.

He underscored the challenge policymakers face in navigating Trump's tariffs policy and the potential impact on the domestic economy. Overall, EUR/USD is now experiencing heightened volatility, reflecting the confluence of trade policy uncertainties, fiscal stimulus measures, and evolving monetary policy stances. Thus, traders should carefully assess the potential shifts in the currency pair's trajectory. The sideways market will likely set in in the short term, with the pair moving within the 1.07500–1.09000 range.

EUR/USD rose slightly during the Asian and early European trading sessions. Today, traders should focus on the Purchasing Managers' Index (PMI) reports. French, German, and Eurozone data will come out at 8:15, 8:30, and 9:00 a.m. UTC, respectively. The US PMI is due at 1:45 p.m. UTC. All reports will likely impact the EUR/USD exchange rate. Key levels to watch are support at 1.07540 and resistance at 1.09130.

GBP Traders Await Economic Data to Understand the Currency's Trend

The British pound (GBP/USD) lost 0.35% against the US dollar (USD) on Friday. Traders repositioned into the greenback, awaiting clarity on US President Donald Trump's next round of tariffs.

The deadline for new tariffs is 2 April, when the White House will announce reciprocal taxes on many countries. 'We downgraded our dollar forecasts last week but still expect some dollar strength from current levels', Goldman Sachs analysts wrote in a research note. Although the U.K. isn't the primary target of Trump’s new tariffs, duties can still negatively affect GBP/USD due to deteriorating economic sentiment.

While trade tariffs remain a significant concern, investors should also focus on other factors that influence the market dynamics. This week, GBP/USD traders should closely monitor a series of critical macroeconomic reports: Retail Sales, the Consumer Price Index (CPI) report, and the U.K. budget. All the data may significantly impact the currency pair. Traders should expect heightened volatility as these key economic announcements create a potentially turbulent week for GBP/USD.x

GBP/USD rose during the Asian and early European trading sessions. Today, traders should focus on several Purchasing Managers' Index (PMI) reports. U.K. PMI report is due at 9:30 a.m. UTC, while the US PMI data will come out at 1:45 p.m. UTC. If U.K. PMI figures are lower than expected and underperform compared to US figures, GBP/USD will likely plunge sharply, possibly below 1.28600. However, better-than-expected U.K. figures will likely push GBP/USD higher, above the important 1.29550 level.