• Gold bars are shown stacked in a vault at the United States Mint in an undated photo, in West Point, New York. (AP/Mike Groll)

Gold prices have pulled back slightly from a new all-time high reached earlier in the European session, dropping back below $3,300. Traders are likely taking profits after a strong rise, as the market looks a bit overbought, and with Federal (FED) Reserve Chair Jerome Powell's upcoming speech possibly giving clues about future interest rate cuts.

The pullback doesn't have any clear cause, but gold is still expected to remain supported, as ongoing trade uncertainties could continue to drive demand for the safe-haven metal.

Concerns about a slowing US economy, partly due to tariffs, could lead the Federal Reserve to cut interest rates more aggressively, which would likely help support gold prices. Traders are even expecting the Fed to cut rates by 1% in 2025. At the same time, weaker confidence in the US economy is keeping the US Dollar low, near its lowest point since April 2022. This should help prevent gold prices from falling too much. So, it's important to be cautious before assuming gold has reached its peak and expecting a big drop in price.

Trade developments and technical outlook for gold

Last week, US President Donald Trump reversed his stance and decided to postpone his heavy tariffs on most US trading partners for 90 days. He also hinted that he might offer exemptions on auto tariffs and removed smartphones, computers, and some other electronics from high tariffs on China.

China, on the other hand, increased its tariffs on US imports to 125% last Friday, fueling concerns that a tit-for-tat trade war between the world's two largest economies would weaken global growth. This continues to weigh on investors' sentiment and benefits safe-haven assets, lifting the Gold price to a fresh record high on Wednesday.

Trump's sudden changes in tariff policies have shaken investors' trust in US economic strategies, leading to weaker confidence in the US economy. On top of that, expectations that the Federal Reserve will cut interest rates by 1% in 2025 caused the US Dollar to drop significantly, reaching its lowest point since April 2022 last week.

On Wednesday, data revealed that China's economy grew by 5.4% in the first quarter compared to the same period last year, surpassing expectations. Other key economic indicators from China, including Retail Sales, Industrial Production, and Fixed Asset Investment, also performed better than anticipated. However, these positive figures were overshadowed by escalating trade tensions with the US.

Chinese leader Xi Jinping’s is visiting several Asian countries this week as he makes a case for free trade, presenting China as a source of “stability and certainty” in uncertain times.

Investors are now looking to comments from Fed Chair Jerome Powell for further insights into the future direction of interest rates, which will be crucial in shaping US dollar price movements. Additionally, developments related to trade are expected to provide significant momentum for the Gold/Dollar pair, which appears set to continue its upward trend.

From a technical standpoint, the Relative Strength Index, or RSI (which provides a measure of a stock’s overbought and oversold position), on both the daily and 4-hour charts is showing slightly overbought conditions, suggesting caution for bullish traders (traders who expect an upward trend in prices). Therefore, it may be wise to wait for a brief period of consolidation or a small pullback before targeting further gains in gold prices.

In the short term, any pullback could find support around the $3,246-3,245 range, just above the Asian session low near $3,230-3,229. However, if prices drop further, it may still be viewed as a buying opportunity, with any decline likely to be capped near the $3,200 level.