Gold prices experienced a retreat during the North American session on Tuesday, as the US Dollar (USD) staged a recovery, gaining modestly amid softer US economic data and reduced demand for safe-haven assets. At the time of writing, XAU/USD was trading at $3,323, down by 0.60%.
Factors Driving the Drop in Gold Prices
The movement in gold prices can be attributed to several factors:
Recovery of the US Dollar: The US Dollar Index (DXY), which tracks the value of the greenback against six major currencies, rose by 0.27%, pushing back above the 99.00 handle after falling to a yearly low of 97.92 on April 21. This recovery in the USD capped gold’s price gains.
Optimism in US Equity Markets: US equities continued to rise, as investors became optimistic about potential easing of tariffs on autos, car parts, and trucks. Additionally, there were signs that the US might soften its stance towards China regarding trade disputes. This optimism further reduced the demand for gold, which often thrives in periods of market uncertainty.
Weaker US Economic Data: While the US dollar strengthened, economic data released in the US showed signs of weakness. The Job Openings and Labor Turnover Survey (JOLTS) for March revealed a drop in job openings to 7.192 million, signaling weaker labor demand than expected. The Conference Board Consumer Confidence Index also plunged to 86.0 in April, its lowest level in nearly five years, signaling growing pessimism about the economy.
Impact of US Economic Data and Trade Tensions
Despite these softer economic data points, gold remains affected by the ongoing trade negotiations between the US, India, Japan, and China. US Treasury Secretary Scott Bessent remarked on progress in trade discussions with India and Japan, but there was little clarity on talks with Beijing.
The US economic schedule is expected to have a significant impact on gold prices this week, with key data including:
Q1 2025 Gross Domestic Product (GDP) figures
Core Personal Consumption Expenditures (PCE) Price Index
Nonfarm Payroll figures
The release of this data could provide further direction for both gold and the broader market.
Gold Price Outlook: Bullish Momentum, But Testing Support Levels
From a technical perspective, gold’s uptrend remains intact, but the metal has been consolidating within the $3,260 – $3,386 range over the past five trading days. Gold has struggled to break either below the $3,200 support level or surpass the $3,400 resistance mark.
Relative Strength Index (RSI): The RSI shows that momentum remains bullish, but the index’s slope is flattening towards the neutral line. This suggests that neither buyers nor sellers currently dominate the market, leading to indecision.
Key Support and Resistance Levels
Support: If gold falls below $3,300, the next major support level would be the April 23 swing low of $3,260, followed by $3,200.
Resistance: On the upside, if gold rises past the $3,400 mark, the next resistance level would be $3,450, before reaching the all-time high of $3,500.
Conclusion
Gold prices are retreating as the USD strengthens and optimism returns to global equity markets, driven by expectations of softened trade tensions. While gold’s uptrend remains intact, market uncertainty and economic data releases could determine the metal’s next move. With gold consolidating between key support and resistance levels, the upcoming US economic data may provide the catalyst needed for a breakout. Traders should watch for potential moves below $3,200 or above $3,400 for further indications of gold’s future trajectory.
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