Gold prices fell to $3,227 on Wednesday as easing US-China trade tensions and weaker-than-expected inflation data undermined the safe-haven appeal of the precious metal. The tariff reduction agreement between the US and China, lowering tariffs on low-value Chinese goods to 30%, has reduced global trade concerns, encouraging investors to shift their capital towards risk assets and away from gold.
Key Market Drivers Impacting Gold
US-China Tariff Truce: The temporary tariff truce between Washington and Beijing, which reduces tariffs on low-value Chinese imports to 30%, has alleviated concerns over a potentially damaging trade war. President Trump expressed confidence that tariffs will not return to 145%, signaling a potential long-term deal. This de-escalation in geopolitical tensions has reduced gold’s safe-haven demand, with investors becoming more comfortable with riskier assets.
Inflation Data and Fed Rate Speculation: The latest US Consumer Price Index (CPI) data for April showed a 0.2% increase, below the expected 0.3% rise, aligning with market expectations for a 53 basis-point rate cut by the Federal Reserve in September. While lower interest rates generally support gold, the modest CPI print failed to provide enough bullish momentum to reverse the prevailing downtrend. The market is now awaiting Thursday’s Producer Price Index (PPI) data for further insight into the Fed’s future policy direction. A soft PPI print could stabilize gold’s decline, but until dovish confirmation is received, gold remains under pressure.
Gold (XAU/USD) Technical Outlook
Gold is currently trapped in a descending channel, indicating continued bearish momentum. After failing to break above $3,257, the precious metal is now trading below its 50-period Exponential Moving Average (EMA) of $3,275. The MACD also signals continued downside potential, with the histogram bars still in negative territory.
Sell Entry: Below $3,204
Target 1: $3,172
Target 2: $3,142
Stop Loss: Above $3,258
As long as gold remains below $3,257, the bearish outlook remains valid. A break below $3,204 could open up further downside, while a move above $3,257 could signal trend exhaustion and a potential reversal.
Conclusion
Gold’s downside remains intact for now, with the US-China truce and modest inflation data reducing the safe-haven appeal. The technical outlook supports further declines, and traders will be watching the PPI data closely for signs of a shift in Fed policy. A continued decline below key levels could lead to more downside for gold, potentially targeting $3,172 and $3,142.
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