Gold prices are currently hovering near weekly lows, trading below $3,300, as the US Dollar (USD) gains strength on renewed optimism surrounding US trade deals. However, despite the bearish sentiment, gold remains resilient, and its next move will likely be shaped by the upcoming US-China trade talks.
US-UK Trade Deal Boosts Risk Sentiment, King Dollar Rises
The US Dollar has been buoyed by the announcement of a US-UK trade deal, which has raised expectations that other trade agreements may soon follow, especially with China. President Trump and UK Prime Minister Keir Starmer’s announcement has triggered optimism, easing concerns about a potential US economic downturn.
This optimism has pushed the USD higher against its major rivals, making gold, priced in dollars, less attractive. However, the US-China trade talks, set to take place over the weekend in Switzerland, could be the next significant event to influence both gold and the dollar. US Treasury Secretary Scott Bessent and Chief Trade Negotiator Jamieson Greer will meet with China’s Vice Premier He Lifeng, and any developments from these discussions could spark renewed volatility in the markets.
Geopolitical Risks Keep Gold in Play
Despite the US Dollar’s strength, gold remains a potential safe haven due to heightened geopolitical risks. Analysts have pointed to rising tensions globally, with ongoing conflicts between Russia and Ukraine, Israel’s escalating situation with Iran-backed forces in Yemen, and fears of broader military conflicts along the India-Pakistan border.
In addition, concerns over the potential impact of US tariffs on Chinese trade in April and China’s continuous expansion of its gold reserves for the sixth consecutive month provide support for gold, suggesting that investors might look to buy the yellow metal amid global uncertainties.
Gold Price Technical Analysis
From a technical perspective, gold has experienced a sharp decline after facing rejection above the $3,400 level. The 21-day Simple Moving Average (SMA) at $3,306 has been breached, and gold is currently testing this level as support.
However, the 14-day Relative Strength Index (RSI) has stalled its downward movement and is holding around the midline, signaling that a potential rebound could be on the horizon.
For gold to regain bullish momentum, it will need to recapture the $3,400 mark, which could open the door for further gains towards the two-week high of $3,440. A break above $3,440 would pave the way for a test of the record high of $3,500.
Downside Risk and Key Support Levels
On the downside, gold sellers will be eyeing a potential daily close below the 21-day SMA at $3,306. If this occurs, it could negate any near-term bullish potential, triggering a fresh downtrend towards the 50-day SMA at $3,129. Before reaching this level, there are several key support zones to watch:
$3,260 (static support)
$3,223 (May 2 low)
If these support levels hold, gold may find a temporary floor before making another attempt at recovery.
Conclusion
In summary, gold is facing downward pressure from a stronger USD and risk-on sentiment following the US-UK trade deal, but it remains supported by geopolitical uncertainties and China’s growing gold reserves. The upcoming US-China trade talks could provide a fresh catalyst for volatility, with potential for both upside and downside moves in gold.
Traders should monitor the $3,300 level closely for any potential breakdowns or rebounds. A reversal above $3,400 could signal a return to bullish territory, while a close below $3,306 would likely signal further downside towards $3,260 and $3,223.
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