The gold price (XAU/USD) continues to trade under pressure, hovering near $3,235 during the early Asian trading hours on Tuesday. The precious metal remains defensive as a confluence of macroeconomic and geopolitical factors—including a resurgent US Dollar (USD), rising US Treasury yields, and improved risk sentiment—continue to erode demand for traditional safe-haven assets.
US-China Trade Truce Dampens Safe-Haven Appeal
The latest bout of weakness in gold prices follows the weekend’s breakthrough in US-China trade negotiations, where both sides agreed to significant reciprocal tariff reductions. Effective for 90 days, the US will lower tariffs on Chinese imports from 145% to 30%, while China will cut duties on US goods from 125% to 10%. The announcement has soothed global markets, lifting equities and risk assets while sidelining gold.
Market participants have interpreted the agreement as a constructive step toward a more durable trade resolution, reinforcing the prevailing risk-on mood.
US CPI Data in Focus as Markets Eye Fed Policy Path
While trade developments have dominated headlines, attention now shifts to the US Consumer Price Index (CPI) report for April, due later today. This data could be pivotal in shaping expectations for the Federal Reserve’s (Fed) future rate decisions.
Consensus forecasts suggest:
Headline CPI YoY: 2.4% (unchanged from March)
Core CPI YoY: 2.8% (steady from prior month)
A higher-than-expected reading could reignite fears of persistent inflation, potentially delaying Fed rate cuts and further boosting the USD—both negative for gold. Conversely, softer inflation figures might revive dovish bets, offering relief to bullion prices.
Currently, swap markets are pricing in the Fed’s first 25 basis point rate cut for the September meeting, with expectations of two additional cuts by year-end. This is a notable shift from last week’s projection of three cuts starting as early as July, reflecting the market’s reassessment of the Fed’s policy trajectory amid improving economic data.
Geopolitical Risks Still Lurking in the Background
Despite the temporary reprieve from US-China tensions, other geopolitical hotspots continue to pose potential upside risks for gold:
India-Pakistan Relations: Indian PM Narendra Modi remarked on Monday that military operations against Pakistan are merely “in abeyance,” leaving room for future escalations depending on Pakistan’s actions.
Russia-Ukraine Conflict: Ukrainian President Volodymyr Zelensky expressed willingness to meet with Russian President Vladimir Putin this week for peace talks in Turkey, following urging from former US President Donald Trump.
Any flare-ups in these geopolitical situations could reignite safe-haven flows, providing fresh support for gold prices despite current bearish pressures.
Technical Outlook: Gold Faces Key Support Tests
From a technical standpoint, XAU/USD remains vulnerable to further downside unless a decisive reversal materializes. The next immediate support is seen at the May 1 low of $3,202. A break below this level could expose gold to deeper losses towards the 50-day Simple Moving Average (SMA) at $3,137, with the $3,100 psychological level acting as the final buffer before a more significant correction unfolds.
Conversely, a sustained move above $3,300 would be critical to halt the bearish momentum. Bulls would then target the $3,350 resistance zone, followed by $3,400. However, reclaiming higher ground will likely require a catalyst such as weaker US inflation data or renewed geopolitical tensions.
Key Takeaways
| Factor | Impact on Gold | Current Status |
|---|---|---|
| US-China Trade Truce | Negative (risk-on mood) | Tariff reductions for 90 days |
| US Dollar Strength | Negative | DXY above 101.70 |
| US Treasury Yields | Negative | 10-year yield at 4.43% |
| US CPI Data | Potentially Mixed | Awaiting April release |
| Geopolitical Risks | Potentially Positive | India-Pakistan & Russia-Ukraine tensions |
| Fed Rate Cut Expectations | Mixed | First cut now seen in September |
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