Gold prices (XAU/USD) have recovered some of their earlier losses but remain under the $3,400 mark as the European session approaches on Wednesday. The precious metal, which had trimmed its intraday losses, continues to maintain a negative bias. Meanwhile, the US Dollar (USD) struggles to gain momentum, lingering near its weekly low. Geopolitical tensions, including the ongoing Russia-Ukraine conflict, Middle East instability, and military tensions between India and Pakistan, continue to support gold as a safe-haven asset.
Despite these factors, optimism surrounding US-China trade talks, set to take place in Switzerland this week, has helped boost risk sentiment, which in turn has pressured gold prices. Traders remain cautious, preferring to wait for the results of the Federal Open Market Committee (FOMC) meeting, which could provide further direction for the USD and impact the price of gold.
Geopolitical Developments and Market Sentiment
US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are scheduled to meet with Chinese officials on Saturday in Switzerland, marking the first direct trade talks since the US imposed tariffs on China. This meeting signals a potential step towards resolving the ongoing trade dispute between the two largest economies. However, US President Donald Trump’s recent remarks regarding a review of potential trade deals have injected uncertainty into the market. Trump also announced the possibility of fresh tariffs on pharmaceutical imports and reiterated his decision to impose 100% tariffs on foreign-produced films. These developments contribute to an air of caution and continue to support gold prices amid heightened geopolitical risks.
In Eastern Europe, Russia has reaffirmed its plan for a unilateral ceasefire between May 8 and May 11, with a warning of an immediate response if Ukraine does not halt its fire as well. Meanwhile, the ongoing conflict in Gaza has seen Israel’s security cabinet approve a plan to expand its military offensive, with the Israeli Defense Forces (IDF) set to increase their presence in Gaza following Trump’s upcoming visit to the region.
Federal Reserve’s Policy Decision Looms
As traders await the Federal Reserve’s monetary policy decision later today, market participants will be closely watching the accompanying statement and comments from Fed Chair Jerome Powell. Any signals regarding future rate cuts could significantly influence USD demand and, by extension, the price of gold.
Gold’s Technical Outlook
From a technical perspective, gold prices showed a notable breakout above the $3,360-$3,365 resistance zone overnight, a move that initially triggered bullish momentum. Oscillators on the daily chart remain in positive territory, suggesting the potential for further upward movement. However, the gold rally has encountered resistance near the $3,430-$3,435 range. A sustained break above this level could see prices challenge the all-time high reached in April and target the psychological $3,500 mark.
Conversely, should prices fall below the $3,365-$3,360 area, support is expected near $3,328-$3,327, followed by the $3,300 mark. A failure to hold these support levels would likely reverse the positive outlook, potentially pushing gold prices towards intermediate support levels at $3,265-$3,260 and the recent swing low near $3,200.
As traders await further developments, gold prices remain in a state of flux, with geopolitical risks, trade negotiations, and Federal Reserve policy all playing significant roles in shaping the metal’s future direction.
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