Gold prices saw a modest recovery on Tuesday, rebounding from Monday’s sharp decline as investors remained cautious ahead of the US Consumer Price Index (CPI) release and fresh market signals from the ongoing US-China trade developments.
At the time of writing, spot gold (XAU/USD) was trading near $3,256 per ounce, regaining ground after a 2.65% drop triggered by optimism surrounding the US-China trade agreement. Despite the relief rally, traders are skeptical about the lack of details in the trade announcement, keeping the outlook for bullion supported amid persistent global uncertainties.
Trade Tensions and Inflation in Focus
While the reduction of tariffs between the US and China has eased immediate market fears, experts warn that the current trade environment still poses inflationary risks. Chicago Federal Reserve President Austan Goolsbee highlighted that existing tariffs continue to exert upward pressure on inflation. Similarly, Deutsche Bank analysts stated that while trade relief may ease supply-side inflation concerns, it is unlikely to prompt a swift Fed rate cut.
“The devil is in the details during negotiations,” said Christopher Wong, strategist at Oversea-Chinese Banking Corp, as quoted by Bloomberg. Wong expects gold prices to consolidate between $3,150 and $3,350 per ounce in the near term.
In addition, remarks from US President Donald Trump on trade relations with the European Union added to market volatility. Trump described the EU as “nastier than China” in trade dealings, signaling the possibility of new tensions ahead.
CPI Data Awaited as Key Market Catalyst
Investors are now awaiting the April US CPI report, scheduled for release at 12:30 GMT. Economists forecast a monthly headline CPI increase of 0.3%, rebounding from March’s -0.1%. The annual CPI rate is expected to remain steady at 2.4%. Similarly, core CPI figures are anticipated to hold at 2.8% annually, with a monthly uptick to 0.3%.
Persistent inflation pressures, despite easing trade concerns, support Deutsche Bank’s view that the Fed is unlikely to cut interest rates before December. This cautious outlook typically benefits gold, which has an inverse relationship with interest rates.
Technical Outlook: Gold Eyes Key Resistance Levels
Technically, gold faces immediate resistance at $3,289, with further upside potential towards $3,341 if bullish momentum strengthens. The daily pivot point is positioned at $3,248, aligning with recent highs and providing a critical level for traders.
On the downside, support is forming around $3,195, with additional levels at $3,167 and $3,155. A break below these could bring the 55-day Simple Moving Average at $3,121 into focus.
Market participants remain cautious, viewing the recent pullback as a potential buying opportunity amid geopolitical risks and uncertain monetary policy trajectories.
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