Gold prices are struggling to capitalize on the modest uptick seen the previous day and are now attracting fresh selling during the Asian session on Wednesday. Optimism over de-escalating trade tensions between the US and China, two of the world’s largest economies, has continued to support a generally positive sentiment in equity markets. This has undermined demand for gold, traditionally considered a safe-haven asset, keeping the precious metal close to its weekly low, touched earlier in the week.
Key Market Drivers Impacting Gold
US-China Trade De-Escalation
US President Donald Trump’s comments on the US-China trade relationship have contributed to optimism in the market. On Monday, Trump stated that he does not foresee tariffs on Chinese imports returning to 145% after the 90-day pause. On Wednesday, Trump further emphasized that the relationship with China is “excellent,” further dampening the appeal of gold during the Asian session. This positive trade sentiment has weighed heavily on gold prices, pushing them lower.
Geopolitical Risks
On the geopolitical front, tensions continue to simmer. The Russia-Ukraine peace talks are set to resume this week, the first high-level face-to-face negotiations since 2022. Additionally, the Israeli military intercepted a hypersonic ballistic missile fired by the Iran-aligned Houthis militia group towards Tel Aviv, highlighting ongoing geopolitical risks. These factors may prevent traders from making aggressive bearish bets on gold.
US Inflation Data and Fed’s Policy Outlook
The latest US inflation data, reported by the Bureau of Labor Statistics (BLS), showed that the headline Consumer Price Index (CPI) edged lower to 2.3% YoY in April, down from 2.4% the previous month. The core CPI, which excludes volatile food and energy prices, rose by 2.8% YoY, in line with expectations. This softer inflation reading has reaffirmed market expectations for at least two interest rate cuts by the Federal Reserve in 2025, contributing to the US Dollar’s pullback from its recent highs and limiting further losses in gold.
Technical Outlook: Key Support and Resistance Levels
From a technical perspective, gold prices are testing the 200-period Exponential Moving Average (EMA) on the 4-hour chart, currently around the $3,225 region. This level has acted as a support zone since the start of the week. However, oscillators on the daily chart have begun drifting into negative territory, suggesting that a break below the 200-period EMA could trigger further downside.
Bearish Scenario: A decisive break below the $3,225 support would likely lead to a test of the key $3,200 level. If this level is breached, gold could accelerate its fall towards the next support zone around $3,135, marking a continuation of the corrective slide from April’s all-time peak of $3,500.
Bullish Scenario: On the upside, the immediate resistance is located around the $3,265-$3,266 region. If gold can break above this level, the $3,300 mark could be the next target. Further momentum beyond the weekly high around $3,317-$3,318 would shift the bias toward the bullish side, with a potential move toward $3,345-$3,347 and ultimately the $3,360-$3,365 resistance zone.
Market Outlook
While the easing of US-China trade tensions has helped equities and weakened demand for gold in the short term, geopolitical risks and the potential for further inflation data to support the Fed’s rate-cut expectations may provide a floor for gold prices. Investors will closely watch how these factors evolve, especially as the market continues to digest the US inflation data and awaits further Fed commentary. In the short term, gold’s direction will largely depend on whether it can hold above the key technical support levels or if a break below them triggers a deeper correction.
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