- Gold prices are likely to face new selling pressure, which might diminish some of the gains made during Thursday’s rebound.
- Growing optimism regarding US-China trade deals is undermining safe-haven demand for precious metals.
- Bets on interest rate cuts by the Federal Reserve might keep the US dollar weak, thereby limiting losses in the market amidst global tensions.
Gold prices (XAU/USD) have had trouble leveraging the strong recovery from the previous day, where they were around the $3,120 range, the lowest since April 10, attracting some sellers during Friday’s Asian trading session. The 90-day trade truce between the US and China is perceived as a key element reducing global market pressure, which negatively impacts safe-haven assets like gold. Nonetheless, ongoing geopolitical issues and a weaker US dollar might lead traders to avoid aggressive bearish positions on gold, especially considering expectations for more interest rate cuts from the Federal Reserve.
Recent macroeconomic data from the US indicates inflationary trends that reinforce calls for further policy easing by the Central Bank. This could lead to lower US Treasury bond yields, putting the US dollar in a defensive position, which, in turn, benefits non-yielding assets like gold. Therefore, it might be prudent to wait for a stronger decline before committing to new positions in gold after its recent highs in April. Still, the XAU/USD pair seems set to record weekly losses amid optimism in trade discussions.
Market Update: Gold Prices Held Back by Trade Optimism
- The US and China have agreed on significant tariff reductions, initiating a 90-day suspension aimed at reaching a comprehensive agreement, amid a tense standoff between the two largest economies.
- Negotiators from the US and Ukrainian delegations are meeting with Russian officials in Istanbul, Turkey, for their first direct peace talks in three years. However, the absence of President Putin raises doubts about achieving a significant breakthrough in the ongoing conflict.
- Israeli forces have escalated their military operations in the Gaza Strip since Thursday morning, resulting in at least 143 Palestinian casualties. This ongoing violence adds to global geopolitical risks and may support gold prices, particularly when the demand for US dollars remains weak.
- Two disappointing economic reports from the US released on Thursday have bolstered market expectations for further interest rate cuts this year, leading to a notable decline in US Treasury bond yields and providing support for gold prices.
- April’s US producer price index for final demand dropped 0.5%, marking its first decline since 2023 and exceeding expectations compared to Tuesday’s Consumer Price Index (CPI).
- Additionally, the Department of Commerce reported a 0.1% rise in retail sales for April, a significant slowdown from the previous month’s growth of 1.7%. This suggests that the US economy may face slower growth in the coming quarters, reinforcing expectations of a dovish Federal Reserve.
Gold Prices Need to Break Key Resistance for Short-Term Gains
Technically speaking, gold prices need to surpass the $3,252-$3,255 range to gain any short-term momentum. Currently, they’re hovering near a significant support level based on daily charts and moving averages from the last month. It might be wise to wait for a stronger following before taking bullish positions on gold, considering the recent downturn registered last week.
If prices fall below the $3,200 mark, support could emerge around the $3,178-$3,177 range. Further selling pressure might make gold vulnerable to declines, particularly if it dips beneath the $3,120 level, potentially leading to a downward trajectory towards $3,100 and subsequent support around $3,060.
On the other hand, the resistance in the $3,252-$3,255 range could keep gold traders cautious. However, a sustained breakout could trigger a rally, pushing gold prices back up to $3,300. Successfully breaching this point may help shift market sentiment away from negative biases and open the door for additional gains.
