Gold prices regained modest ground on Tuesday, following a sharp 2.7% decline the previous day. Spot gold traded near $3,250, marking a 0.42% rise as softer-than-expected U.S. inflation data and easing trade tensions between the U.S. and China influenced market sentiment. However, the overall bullish momentum remains capped below the critical $3,300 level as risk appetite grows and Treasury yields remain elevated.
US Inflation: Slight Relief, But Limited Impact on Gold
April’s Consumer Price Index (CPI) rose 0.2% month-over-month, below the anticipated 0.3% increase. On a yearly basis, CPI climbed 2.3%, slightly under expectations and prior readings. Core CPI, which excludes volatile food and energy prices, increased 0.2% month-over-month—softer than the 0.3% forecast—while remaining steady at 2.8% year-over-year.
Though inflation came in cooler than expected, the figures suggest that the full impact of recent tariffs has yet to manifest in broader price data. Analysts warn that larger price increases from tariffs are still in the pipeline, which could fuel inflationary pressures later this year.
Federal Reserve Outlook: Rate Cuts Expected, But Policy Remains Restrictive
Despite the inflation dip, money markets still price in approximately 52 basis points of rate cuts by December 2025, consistent with the Fed‘s projections. Traders expect two rate cuts, aligning with the central bank’s December and March guidance. However, persistent high yields in the bond market suggest that financial conditions remain restrictive in the short term.
The 10-year U.S. Treasury yield rose 1.5 basis points to 4.489%, while real yields, measured by 10-year Treasury Inflation-Protected Securities (TIPS), held steady at 2.199%.
US-China Trade Truce Boosts Risk Appetite
The announcement of a tariff agreement between the U.S. and China, reducing levies on low-value goods to 30%, has boosted global risk sentiment. President Trump further assured that tariffs would not return to 145% after the current 90-day reduction window, fueling optimism for a longer-term trade deal.
This risk-on mood has dampened demand for traditional safe-haven assets like gold, limiting its upside despite the supportive inflation data.
Central Banks Continue Gold Purchases
Adding a layer of underlying support, central banks remain active gold buyers. In April, the People’s Bank of China increased its gold reserves by 2 tonnes, marking the sixth consecutive monthly addition. The National Bank of Poland added 12 tonnes, while the Czech National Bank raised its holdings by 2.5 tonnes. These strategic purchases underscore the long-term bullish case for gold, even amid short-term headwinds.
Gold Technical Outlook: Eyes on $3,250, but Risks Tilt Lower
From a technical perspective, gold’s recovery faces critical resistance near $3,300. A “double-top” pattern is emerging on the daily chart, suggesting potential for further downside if sellers manage to breach the May 1 low at $3,202. Below this level, targets include $3,100, $3,000, and potentially $2,950.
Conversely, a decisive break above $3,300 would shift the near-term bias bullish, opening pathways to $3,350 and $3,400.
Key Technical Levels:
Support: $3,202, $3,100, $3,000, $2,950
Resistance: $3,300, $3,350, $3,400
Upcoming Data to Watch
Market participants will closely monitor Thursday’s U.S. Producer Price Index (PPI) and Retail Sales data for further clues on the Federal Reserve’s rate path and inflation trajectory. A softer PPI reading could bolster gold by reaffirming expectations of monetary easing, while strong retail data may limit gains.
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