Gold prices have been trading in a narrow range near daily lows, showing modest losses, but managing to stay above the $3,200 mark. The overall market sentiment remains positive, fueled by optimism surrounding the de-escalation of the US-China trade war, which is diminishing demand for the safe-haven precious metal.
Key Factors Affecting Gold Price
US-China Trade Optimism: The positive sentiment from the ongoing US-China trade negotiations continues to weigh on gold. US President Donald Trump recently expressed that he does not expect tariffs on Chinese imports to return to the previous high levels after the current 90-day pause. His statements further contribute to the risk-on market mood, undermining demand for gold as a safe-haven asset.
Softer Inflation Data: On Tuesday, the US Bureau of Labor Statistics reported a slight dip in the headline Consumer Price Index (CPI), from 2.4% to 2.3% year-over-year for April. The core CPI, which excludes food and energy prices, was in line with expectations, showing a 2.8% annual increase. The softer inflation figures have reinforced market expectations for potential interest rate cuts by the Federal Reserve in 2025, which has kept the US Dollar subdued.
Geopolitical Risks: While the trade optimism is undermining safe-haven demand, geopolitical tensions, such as the ongoing Russia-Ukraine talks and missile interceptions by Israel, continue to keep some risk factors in play. These geopolitical events may prevent traders from making aggressive bearish bets on gold.
Technical Analysis
On the technical front, the XAU/USD pair is showing some resilience near the 200-period Exponential Moving Average (EMA) on the 4-hour chart, currently situated around $3,225. A key level for traders to watch is the potential break below this support. A sustained drop below the $3,200 mark would signal a fresh breakdown, potentially driving gold prices further down, possibly towards the next support level at $3,135.
On the upside, the immediate resistance lies around the $3,265-$3,266 region. If gold can break above this level, it may aim for a move toward the $3,300 mark. Further buying momentum beyond the $3,317-$3,318 area could shift the bias toward the bullish side, potentially pushing prices to the $3,345-$3,347 level and even further to $3,360-$3,365.
Outlook
The market is currently awaiting more significant economic data and speeches from Federal Reserve officials, which could provide additional direction. However, the broader risk sentiment, including trade negotiations and geopolitical developments, will remain a key influence on gold prices in the short term. While gold is struggling to attract buyers due to improved risk sentiment, its potential downside remains limited by the soft USD and expectations of interest rate cuts by the Fed.
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