Gold prices experienced a slight recovery after dipping to a daily low, climbing back above the $3,300 level in the final hour of trading. However, the precious metal continues to display a negative bias during the first half of Friday’s European session.
The rebound comes after China’s Foreign Ministry denied any ongoing trade negotiations with the United States over tariffs, dampening market optimism. This news has provided some support for gold, a traditional safe-haven asset. Additionally, the prolonged Russia-Ukraine conflict continues to contribute to geopolitical risk, preventing significant declines in gold prices.
Investors remain cautious amid the possibility of more aggressive policy easing by the Federal Reserve (Fed). Despite these concerns, the market sentiment is somewhat balanced as optimism surrounding potential trade de-escalation between the U.S. and China persists, supporting equity markets. At the same time, a modest strengthening of the U.S. Dollar (USD) has kept traders from making significant bullish moves on gold.
Geopolitical and Economic Developments Affect Gold
While gold remains influenced by geopolitical tensions, U.S. President Donald Trump’s statement on Thursday about ongoing trade talks between the U.S. and China has kept the markets on edge. Reports also suggest that China is considering suspending its 125% tariff on some U.S. imports. However, a statement from China’s Foreign Minister denying any active negotiations has added uncertainty, supporting gold prices further.
Economic data from the U.S. also played a role in shaping market sentiment. The U.S. Department of Labor reported a modest increase in Initial Jobless Claims to 222,000 for the week ending April 19, suggesting continued labor market resilience. Meanwhile, the U.S. Census Bureau revealed that Durable Goods Orders surged 9.2% in March, well above the 2% forecast, marking the third consecutive rise.
On the Federal Reserve front, there are ongoing discussions about potential interest rate cuts. Cleveland Fed President Beth Hammack indicated that rate cuts could happen as early as June if economic data supports it. Fed Governor Christopher Waller also suggested that rate cuts may be necessary if tariffs start to negatively impact the job market. Currently, traders are pricing in the possibility of at least three rate cuts by the end of this year.
Geopolitical Risks and Market Outlook
On the geopolitical front, a Russian missile attack on Kyiv, Ukraine, killed at least 12 people and injured many others. This attack, one of the deadliest since Russia’s full-scale invasion over three years ago, has kept the geopolitical risk premium elevated, providing some support for gold prices.
Looking ahead, traders will be watching the release of the revised Michigan U.S. Consumer Sentiment Index. Additionally, any further developments related to U.S.-China trade talks could influence the U.S. Dollar, with broader market sentiment potentially impacting short-term trading opportunities in the XAU/USD pair.
Technical Outlook: Key Levels for Gold
Technically, gold has shown resilience despite trading below the 38.2% Fibonacci retracement level. A rebound from the weekly low on Wednesday stalled near the 23.6% Fibonacci retracement of the most recent rally, around the $3,368-$3,370 range. This level is now seen as a crucial pivot point.
With daily chart oscillators still in positive territory, a sustained move above this resistance could allow gold to reclaim the $3,400 level. A further rally could target the $3,425-$3,427 zone, and potentially push toward the psychological $3,500 mark.
Conversely, if gold weakens below the $3,330 level, near the 38.2% Fibonacci retracement, it may head toward the weekly swing low around $3,260. A break below this level could trigger a further decline, possibly towards the 50% retracement around $3,225, and eventually the $3,200 mark. A continued bearish move would shift the near-term market bias in favor of sellers.
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