Gold Prices Hold Gains Amid Trade War Uncertainty and US NFP Anticipation

Gold prices (XAU/USD) maintain modest intraday gains on Friday, hovering near their all-time peak as investors brace for the release of the US Nonfarm Payrolls (NFP) report. The yellow metal remains buoyed by persistent safe-haven demand, fueled by escalating US-China trade tensions and expectations of Federal Reserve (Fed) rate cuts.

Trade War Fears Drive Safe-Haven Appeal

The ongoing trade dispute between the United States and China continues to bolster demand for gold as a traditional safe-haven asset. China recently retaliated against US President Donald Trump’s newly imposed 10% tariffs on Chinese imports by announcing its own countermeasures. This renewed trade conflict between the world’s largest economies has heightened economic uncertainty, further supporting gold prices.

Fed Rate Cut Bets Weigh on US Dollar

The US dollar struggles to gain traction as market participants anticipate two rate cuts by the Fed in 2025. A sharp decline in US Treasury yields, particularly the benchmark 10-year bond yield, has reinforced speculation that the central bank will adopt a dovish monetary policy stance. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, making it more attractive to investors.

Recent economic data from the US Department of Labor (DoL) revealed that initial jobless claims rose to 219,000 for the week ending February 1, up from the previous week’s 208,000. This signals potential labor market weakness, adding further pressure on the Fed to ease monetary policy. Meanwhile, statements from US Treasury Secretary Scott Bessent indicate that the administration is more focused on lowering long-term Treasury yields rather than intervening in the Fed’s policy direction.

Inflation, Labor Market, and Gold Price Outlook

Comments from Federal Reserve officials highlight the central bank’s cautious approach. Chicago Fed President Austan Goolsbee acknowledged that inflation may appear stagnant due to base effects, but the overall economic outlook remains stable. Conversely, Dallas Fed President Lorie Logan noted that while inflation has shown progress, the labor market remains too robust to justify imminent rate cuts.

The upcoming NFP report is projected to show that the US economy added 170,000 jobs in January, down from the previous month’s 256,000, while the unemployment rate is expected to hold steady at 4.1%. The data will be instrumental in shaping market expectations regarding the Fed’s policy stance, ultimately influencing the US dollar and gold price movements.

Technical Analysis: Gold Prices at Overbought Levels

From a technical perspective, gold prices remain in a strong uptrend but show signs of slightly overbought conditions, as indicated by the Relative Strength Index (RSI) on the daily chart. Traders may exercise caution, anticipating a short-term consolidation before another leg higher.

Key support levels to watch include the $2,855 horizontal zone, followed by the overnight swing low around $2,834. A deeper pullback could target the $2,815–2,714 region, with a further decline potentially leading to the critical $2,800 mark. Conversely, a decisive break above current resistance levels could trigger renewed bullish momentum toward new highs.

Trade War 2.0: Renewed Tensions Under Trump’s Return

With Donald Trump’s return to the White House as the 47th US President, trade war concerns have resurfaced. During his campaign, Trump pledged to impose 60% tariffs on China, a policy he enacted upon taking office in January 2025. These protectionist measures are expected to disrupt global supply chains, leading to higher costs and inflationary pressures.

As a result, gold remains a preferred hedge against economic instability and market volatility. With geopolitical tensions and monetary policy uncertainty persisting, the precious metal is likely to retain its safe-haven appeal in the near term.

Gold prices continue to trade near record highs, supported by escalating US-China trade war fears, Fed rate cut expectations, and subdued US dollar demand. As investors await the US NFP report, gold’s near-term trajectory will depend on labor market data and its impact on Fed policy. While technical indicators suggest overbought conditions, safe-haven demand is expected to keep the precious metal resilient amid ongoing global uncertainties.