Gold price rebounds as trade war fears and Fed rate cut bets boost demand

Gold (XAU/USD) recovers from a three-day losing streak that took prices to a four-week low. This rebound follows increased demand for safe-haven assets as investors grow more concerned about global economic uncertainty. US President Donald Trump’s newly imposed tariffs have ignited fears of a full-blown global trade war. Fearing economic fallout, investors have turned to safe-haven assets like gold for protection. At the same time, expectations of multiple interest rate cuts by the US Federal Reserve in 2025 have weakened the US Dollar, further boosting gold's appeal.

Gold shows strength amid geopolitical tensions and Fed bets

Gold prices have shown resilience by bouncing back from recent losses. This recovery appears driven by two major forces: geopolitical tension and monetary policy expectations.

Last week's tariff announcement from President Trump created shockwaves in global markets. Investors began bracing for recessionary pressures. Historically, gold has served as a shield in times of uncertainty. That pattern holds today. As the threat of a trade war looms, demand for safe-haven assets rises. Gold, being a non-yielding and inflation-resistant asset, naturally benefits.

Simultaneously, traders are betting on the Federal Reserve to start cutting rates this year. With inflation data steady and global conditions volatile, the Fed may act sooner rather than later. Lower interest rates reduce the opportunity cost of holding gold, making it more attractive. The weakening US Dollar has also contributed to gold's renewed appeal.

Gold technical analysis: Strong rebound faces resistance

The chart below reveals a deep technical narrative behind gold’s recent price action. The price has been trending in a well-defined ascending channel since mid-2018. This channel acted as long-term support and resistance. Recently, the price broke out from a major inverse head and shoulders pattern, signalling a strong bullish reversal.

Post-breakout, gold surged sharply and reached the upper boundary of a secondary ascending channel. At that point, a bearish hammer candlestick formed, a classic reversal signal that often appears near market tops. This candle indicates that although buyers pushed the price higher, sellers quickly took control, closing the week near the opening level.

The current price, around $3,038, reflects a rejection from the channel’s upper trendline. This suggests potential short-term weakness or consolidation. However, as long as gold stays above the neckline of the inverse head and shoulders pattern—around $2,070—the broader trend remains bullish. On the other hand, the rebound from the short-term support of $2,950 is building momentum.

If bearish momentum intensifies, we may see a retest of lower support zones near $2,600 or even the breakout neckline. However, with macro fundamentals still favouring gold, any dips could attract buyers again.

Conclusion

Gold prices are riding a wave of global uncertainty and dovish monetary expectations. The technical picture shows a strong uptrend with potential short-term resistance. The bearish hammer near the top of the ascending channel could trigger a brief correction. However, strong fundamentals—like Fed rate cut bets and geopolitical tensions—support the broader bullish outlook. Investors may see any pullback as a buying opportunity in gold’s ongoing rally.

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