Gold prices fell sharply on Friday, dropping by 2% and heading for a weekly loss, as easing U.S.-China trade tensions and a stronger U.S. dollar exerted downward pressure on the precious metal. Reports that Beijing had started exempting certain U.S. goods from its 125% tariffs sparked optimism about a potential thaw in trade relations, leading to a decrease in demand for gold as a safe-haven asset.
On Friday, gold futures (XAU/USD) settled at $3,319.34, down $29.64, or 0.89%.
China’s Tariff Exemptions Weigh on Gold Demand
China’s decision to grant tariff exemptions on select U.S. imports signaled a softening of its trade stance. Beijing has instructed businesses to identify critical goods, including pharmaceuticals, aerospace parts, and microchips, that should be spared from tariffs. Analysts see this as a significant step toward de-escalation in trade tensions, which has eased concerns about prolonged global trade disruptions. While this development is seen as positive for the global economy, it has dampened safe-haven demand for gold, prompting investors to shift towards riskier assets.
Dollar Strength Adds Further Pressure on Gold
The U.S. dollar recorded its first weekly gain since March, rising by approximately 0.3% against a basket of other currencies. A stronger dollar typically makes gold more expensive for foreign buyers, thereby reducing its demand. The dollar’s uptick was fueled by optimism surrounding U.S.-China trade talks and improved risk appetite, which further contributed to the decline in gold prices. Despite this, some analysts remain cautious, suggesting that underlying uncertainties could continue to support demand for gold in the medium term.
Bond Yields Fall as Traders Monitor Trade Developments
U.S. Treasury yields dropped, with the 10-year yield falling to 4.258%, reflecting cautious optimism regarding trade discussions. Although U.S. President Donald Trump made softer comments on trade and China offered some concessions, traders remain wary about the depth and permanence of any agreement. Trump stated that tariffs would not be removed unless significant concessions were made by China, keeping market sentiment cautious and limiting a full-scale risk-on move.
Gold’s Longer-Term Outlook Remains Cautious Despite Short-Term Dip
While gold prices face immediate pressure from improving trade sentiment and a stronger dollar, the broader outlook for gold remains cautious. The lack of concrete details regarding a U.S.-China trade deal, ongoing concerns about global economic growth, and continued strong central bank demand for gold provide longer-term support for bullion. As uncertainty surrounding a comprehensive trade resolution persists, traders are likely to view any short-term dips in gold prices as potential buying opportunities.
Technical Outlook
From a technical perspective, the primary trend for gold remains upward, according to the daily swing chart. However, momentum has shifted to the downside following the confirmation of a daily closing price reversal top earlier this week. Near-term resistance is seen at the minor pivot level of $3,380.20, while short-term support lies within the retracement zone between $3,228.38 and $3,164.23. The key support level remains the 50-day moving average at $3,050.20, which is a crucial trend indicator.
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