Spot gold fell to a low of $3,123 last week before recovering to close at $3,202, marking its worst weekly performance since November 2024. The decline followed a recent peak of $3,500 reached in April amid heightened U.S.-China tariff tensions.
Eased Trade Fears Spark Risk-On Sentiment
The sell-off in gold was primarily driven by improved risk appetite following the announcement of a 90-day tariff truce between the United States and China. The reduction in geopolitical tension triggered profit-taking in gold futures and a wave of liquidation across the precious metals market.
Major financial institutions also revised their recession forecasts, contributing to the shift in market sentiment. Goldman Sachs lowered its probability of a U.S. recession from 45% to 35%, while Barclays dismissed the risk altogether. J.P. Morgan also reduced its odds to below 50%, signaling a broader return of investor confidence in equities and risk assets.
This reduced recession risk has weakened demand for gold, traditionally seen as a hedge against economic uncertainty.
Yields and Dollar Pressure Gold, But Long-Term Outlook Remains Firm
At the same time, elevated U.S. Treasury yields and a stronger dollar further dampened gold’s appeal. Rising yields increase the opportunity cost of holding non-yielding assets like gold, while a firmer dollar makes the metal more expensive for overseas buyers.
Despite the current headwinds, softening inflation data and expectations of two Federal Reserve rate cuts—possibly beginning in September—are helping to support the longer-term bullish case for gold. Additionally, ongoing geopolitical risks, including U.S.-Iran tensions and the war in Ukraine, continue to underpin market instability.
Gold Technical Analysis: Rebound Signals Stabilization
On the daily chart, gold found key support at its 50-day simple moving average (SMA), rebounding with the formation of a bullish hammer candlestick. Subsequent price action has entered a consolidation phase, suggesting that the market is stabilizing at this support level.
The Relative Strength Index (RSI) is hovering near the midline, indicating neutral momentum and a potential pause in the recent downtrend. Crucially, gold remains above both its 50-day and 200-day SMAs—underlining that the broader trend remains bullish.
A confirmed breakout above $3,370 would signal the resumption of the upward trend.
Shorter-term charts also point to a rebound. The 4-hour chart shows gold finding support at the confluence of two key trendlines—black and red-dotted—around $3,123. The price has since climbed higher, and a sustained move above the $3,300 level would confirm bullish momentum and open the door for further gains.
Treasury Yields: Resilient Amid Pullback
The U.S. 10-year Treasury yield is targeting the 4.60–4.62% range but pulled back to around 4.40% on Friday. Still, the yield remains above its 50-day and 200-day SMAs, indicating that upward momentum is intact. The RSI remains above 50, further supporting the bullish outlook.
The 4-hour chart reveals an inverted head and shoulders pattern, a classic bullish formation. If the yield breaks out of its consolidation phase, further gains may be expected.
U.S. Dollar Index (DXY): Under Pressure Despite Temporary Support
The daily chart of the U.S. Dollar Index (DXY) shows strong bearish momentum after reaching resistance near 102 and retreating. The index has shown resilience by holding above 100.65, but the earlier rebound from the 98 level appears to be losing steam. RSI near the midline suggests that some underlying strength remains, despite the broader bearish structure.
On the 4-hour chart, DXY continues to trade within a descending channel. The earlier rebound from 98 formed an inverted head and shoulders pattern that propelled the index to 102 before fading. As long as the index remains above 100.35, a bullish breakout remains possible. A drop below this level, however, could signal a return to the 98 zone.
Conclusion
While gold has recently faced headwinds from easing recession fears and rising bond yields, its longer-term outlook remains supported by expectations of Federal Reserve rate cuts and persistent geopolitical risks. Technical indicators point to a potential base forming, with a break above $3,300–$3,370 likely to confirm a renewed bullish trend.
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