Gold (XAU/USD) attracts some dip-buyers following an Asian session slide to the $3,963-3,962 region on Monday and climbs back above the $4,000 psychological mark in the last hour. Comments from US President Donald Trump suggested that his administration may restrict the flow of cutting-edge artificial intelligence (AI) hardware to its strategic rival, China. This turns out to be a key factor that provides a modest lift to the safe-haven precious metal. Apart from this, concerns about economic risks stemming from a prolonged US government shutdown further seem to underpin the commodity.
Meanwhile, the US Federal Reserve’s (Fed) hawkish tilt assists the US Dollar (USD) to preserve last week’s strong gains to its highest level since early August and caps the upside for the non-yielding Gold. This, along with the bullish tone around the equity markets, makes it prudent to wait for strong follow-through buying before positioning for an extension of the recent bounce from sub-$3,900 levels, or an over three-week low, touched last Tuesday. Traders now look to the release of the US ISM Manufacturing PMI and speeches from influential FOMC members for short-term opportunities.
Daily Digest Market Movers: Gold attracts some safe-haven flows; Fed’s hawkish tilt warrants caution for bulls
- US President Donald Trump told reporters aboard Air Force One on Sunday that Nvidia’s advanced Blackwell chip for artificial intelligence would not be available to other people. This, to some extent, offsets the latest optimism fueled by the de-escalation of trade tensions between the US and China – the world’s two largest economies – and provides a modest lift to the safe-haven Gold at the start of a new week.
- The US government shutdown enters Day 33 on Monday amid a deadlock in Congress on the Republican-backed funding bill. Trump again urged Republican senators to end the shutdown by abolishing the filibuster rule, an unprecedented move that GOP leaders have, so far, resisted. Nevertheless, concerns that a prolonged government closure could cause economic damage further underpin the precious metal.
- The US Federal Reserve lowered borrowing costs by 25 basis points for the second time this year last Wednesday and also said it would stop reducing the size of its balance sheet as soon as December, marking the end of its quantitative tightening. That said, Fed Chair Jerome Powell cautioned that another similarly-sized interest rate cut is far from a foregone conclusion at the next monetary policy meeting in December.
- Furthermore, a slew of influential FOMC members further pushed back against expectations for more policy easing by the end of this year. This, in turn, assists the US Dollar to preserve last week’s strong gains and stand firm near its highest level since early August. Apart from this, the upbeat market mood could keep a lid on further appreciation for the non-yielding yellow metal and warrants caution for bullish traders.
- Traders now look forward to Monday’s US economic docket, featuring the release of the ISM Manufacturing PMI later during the North American session. Apart from this, speeches from influential FOMC members will play a key role in driving the USD demand and providing a fresh impetus to the commodity.
Gold needs to surpass the $4,045-4,050 barrier to back the case for any further appreciation
The XAU/USD pair showed some resilience below the 100-hour Simple Moving Average (SMA) during the Asian session. Moreover, oscillators on hourly/daily charts have again started gaining positive traction and back the case for additional gains. However, it will be prudent to wait for a sustained move beyond the $4,045-4,050 hurdle, above which the Gold price could climb to the $4,075 intermediate hurdle before aiming to reclaim the $4,100 mark.
On the flip side, the Asian session low, around the $3,963-3,962 region, now seems to protect the immediate downside ahead of the $3,917-3,916 region and the $3,900 round figure. Some follow-through selling below the $3,886 zone, or an over three-week low touched last Tuesday, could make the Gold price vulnerable to accelerate the fall towards the $3,850-3,845 zone en route to the $3,800 mark and the next relevant supports near the $3,765-3,760 zone.
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.