Gold prices are encountering fresh selling pressure as Monday’s trading begins, with the commodity dropping to the $3,268-3,267 range, hovering just above last Friday’s swing low. The decline comes as investors remain hopeful about potential de-escalation in trade tensions between the United States and China, despite the mixed signals from both sides. Additionally, a significant fall in China’s gold consumption during the first quarter of 2025 has led to reduced demand for the precious metal, further weighing on prices.
Key Influencers on Gold Prices
China’s Gold Consumption Decline: The China Gold Association reported a 5.96% drop in gold consumption in the first quarter of 2025, totaling 290.492 tonnes. The fall in demand is attributed to high gold prices, which negatively impacted the jewelry market, with a 26.85% drop in gold jewelry consumption. Meanwhile, gold bars and coins saw an increase in demand by 29.81%.
US Dollar Dynamics: While the US Dollar (USD) showed a recovery last week from a multi-year low, it struggled to maintain upward momentum as bets on the Federal Reserve resuming its rate-cut cycle in June continued. The Fed is expected to lower borrowing costs by one full percentage point in 2025. Although the dollar’s recent gains provided some pressure on gold, the overall market conditions remain conducive for gold to maintain its role as a safe-haven asset.
Trade Deal Optimism and Geopolitical Risks: While US-China trade optimism has sparked hope for a resolution of the ongoing trade tensions, uncertainty persists. Although China has exempted certain US imports from tariffs, further confirmation of these exemptions is still pending. This fuels market sentiment while also weighing on gold’s price. At the same time, geopolitical risks, such as the Russia-Ukraine war and North Korea’s involvement, maintain gold’s status as a safe-haven asset.
Technical Outlook for Gold Price (XAU/USD)
Bearish Pressure: From a technical perspective, gold price bears need to see a sustained break below the $3,265-3,260 range for confirmation of a further decline. If this support level is broken, the price could move lower to the 50% Fibonacci retracement level around $3,225, with $3,200 marking the next key downside target.
Resistance Levels: On the upside, any recovery attempts above $3,300 could face resistance at the $3,331-3,332 level. If gold manages to push through this resistance, a retest of the $3,366-3,368 supply zone could occur. A decisive breakthrough above this zone would pave the way for gold to retake the $3,400 mark, with further momentum potentially driving it towards $3,425-3,427 and ultimately aiming for the psychological $3,500 level.
Market Outlook for the Week Ahead
This week, the market will be closely monitoring key US macroeconomic data, including:
JOLTS job openings report (Tuesday)
US Personal Consumption Expenditures (Wednesday)
Non-Farm Payrolls (NFP) report (Friday)
These data points could provide valuable insights into the Federal Reserve’s monetary policy decisions and potentially influence the direction of gold prices. While gold faces near-term challenges, its long-term outlook remains supported by global uncertainty and continued geopolitical risks.
Conclusion
Gold prices are under pressure, but the downside remains limited due to geopolitical concerns and expectations of US monetary policy easing. Investors should keep a close eye on market developments and key support/resistance levels as any breakouts or breakdowns could provide critical clues for the future direction of gold.
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