Gold is struggling to maintain its ground, hovering around $3,335 during the early Asian session on Tuesday. The precious metal has faced downward pressure due to a modest rebound in the US Dollar (USD) and a reduction in trade tensions between the United States and China, which have historically driven demand for safe-haven assets like gold.
On Friday, China exempted certain US imports from its 125% tariffs, sparking optimism that the ongoing trade war between the two largest economies in the world may be nearing an end. However, the positive sentiment was tempered after China swiftly denied US President Donald Trump’s claims of ongoing trade negotiations.
US Treasury Secretary Scott Bessent further added that while the US is in communication with China, it is up to Beijing to take the first step in de-escalating the tariff dispute, largely due to the trade imbalance between the two nations. As fears surrounding the trade war ease, demand for gold, traditionally seen as a safe-haven investment, has begun to subside. Additionally, a strengthening US Dollar has presented further challenges for the yellow metal, which is typically inversely correlated with the Greenback.
Tim Waterer, Chief Market Analyst at KCM Trade, commented, “Comments last week from the White House have fueled optimism that a US-China trade deal may eventuate, which has caused safe-haven demand for assets such as gold to subside.”
In contrast, expectations that the US Federal Reserve will resume its rate-cutting cycle during the June meeting have provided some support for gold prices. As of now, the Federal Reserve remains in a quiet period ahead of its Federal Open Market Committee (FOMC) meeting on May 7, which will be closely watched by traders for any signals about future monetary policy.
This week, traders are eyeing the preliminary US Q1 GDP report and April employment data, as these economic indicators could offer critical insights into the Fed’s upcoming policy decisions and the broader economic outlook. The consensus forecast is that the US economy will add 135,000 jobs in April, with the unemployment rate holding steady at 4.2%. A weaker-than-expected jobs report could weigh on the US Dollar, potentially boosting the price of gold in the short term.
Overall, while gold faces short-term challenges from a stronger dollar and reduced trade tensions, expectations of a dovish Fed and potentially weaker US economic data may help support prices in the near future.
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