Gold prices took a sharp downturn on Friday, erasing gains from Thursday and falling below the $3,300 mark, currently trading at $3,294—a loss of over 1.60%. This decline comes as the US Dollar (USD) remained firm, with the Greenback continuing to strengthen despite the drop in US Treasury yields. The market reaction follows comments surrounding the US-China trade war, where initial optimism regarding a de-escalation was quickly overshadowed by US President Donald Trump’s remarks that he wouldn’t remove tariffs unless China made concessions.
Trade War Developments and Market Sentiment
Earlier, reports from Bloomberg suggested that China was considering exempting some US products from tariffs, which led to a brief rally in gold prices. However, Trump’s subsequent statement that the tariffs would not be lifted unless China “gives us something” dampened market sentiment. This has resulted in a volatile market, swinging between risk-on and risk-off, as traders recalibrated their expectations. Despite the slight decline in the US Dollar Index (DXY) to 99.51, the USD remains strong, weighing on gold’s ability to recover.
Economic Data and Fed Rate Outlook
Market sentiment was also impacted by weaker-than-expected US consumer sentiment. The University of Michigan’s Consumer Sentiment Index for April dropped significantly, from 57 to 52, its fourth-lowest reading since the 1970s. This is exacerbated by rising inflation expectations, with one-year inflation expectations increasing from 5% to 6.5%.
Looking ahead, traders are awaiting key economic reports, including the March JOLTS (Job Openings and Labor Turnover Survey), the first-quarter 2025 GDP report, the ISM Manufacturing PMI, and April’s Nonfarm Payrolls. While traders see a 92% probability that the Federal Reserve will keep interest rates unchanged at its next meeting, there are expectations that rate cuts could begin later in the year, with a forecasted 86 basis points of easing by December.
Gold’s Technical Outlook: Bullish but Testing Lower Levels
Despite the recent pullback, gold’s long-term bullish trend remains intact. However, with buyers unable to sustain momentum above $3,300, the path seems open for sellers to test lower levels. The Relative Strength Index (RSI) suggests weakening buying pressure, which could lead to further declines.
Key support levels for gold are now at $3,250, with a potential break below this level exposing the April 3 high of $3,167 and the 50-day Simple Moving Average (SMA) at $3,041. On the other hand, if gold prices manage to reclaim the $3,300 level, the next resistance levels to watch would be the April 22 high of $3,386, followed by $3,400, $3,450, and $3,500.
Final Takeaways
The gold market remains highly sensitive to both US dollar strength and geopolitical developments. While gold’s uptrend is still in place, the recent dip below $3,300 indicates a struggle for buyers to push prices higher. Traders will closely monitor economic data and trade negotiations in the coming weeks to gauge whether gold can regain momentum or continue to test lower levels.
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