Gold prices (XAU/USD) edged lower to around $3,235 in early Asian trading on Tuesday, reflecting pressure from a stronger US Dollar, rising US yields, and renewed optimism following a trade deal between the United States and China. The precious metal remains on the defensive, with traders awaiting the release of the US April Consumer Price Index (CPI) later today for further direction.
The reduction of tariffs between the US and China has dampened demand for safe-haven assets like gold. Under the temporary deal, the US has agreed to cut additional tariffs on Chinese imports from 145% to 30%, while Chinese tariffs on US goods will decrease from 125% to 10%. These new measures, which will remain in effect for 90 days, have helped improve market sentiment.
Giovanni Staunovo, an analyst at UBS, explained, “The de-escalation of tensions between China and the US is reducing the demand for safe-haven assets like gold.”
Traders are also closely monitoring the upcoming US CPI data, which could provide valuable insights into the Federal Reserve’s future policy stance. Analysts expect the headline CPI to rise by 2.4% year-on-year in April, with core CPI expected to increase by 2.8%. Market expectations suggest that the Fed may begin reducing interest rates as early as September, with additional cuts likely by the end of the year.
Geopolitical tensions could influence gold’s trajectory, however. India’s Prime Minister Narendra Modi indicated that operations against Pakistan have only been temporarily suspended, leaving future actions contingent on Pakistan’s behavior. Meanwhile, Ukrainian President Volodymyr Zelensky expressed willingness to meet with Russian President Vladimir Putin this week, after former US President Donald Trump urged him to accept Putin’s offer for peace talks in Turkey. Any escalation in these geopolitical events could lead to renewed safe-haven demand for gold.
Long-Term Outlook for Gold Remains Positive
Despite the short-term pullback, gold’s long-term outlook remains constructive. The precious metal continues to trade above its 100-day Exponential Moving Average, signaling overall bullish momentum. However, traders may face some consolidation or temporary sell-offs, as indicated by the 14-day Relative Strength Index (RSI) hovering below the neutral 50 mark.
On the upside, the first key resistance level to watch is $3,347, the high reached on May 9. If gold surpasses this level, it could continue its climb towards $3,432, near the upper boundary of the Bollinger Band. A further breakout could push prices toward the all-time high of $3,500.
Conversely, in a bearish scenario, the initial support level is found at the psychological $3,200 mark. A further decline could see gold testing additional support at $3,142, the high from April 2.
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