Gold prices (XAU/USD) steadied near $3,235 on Wednesday, as the worst of the recent selling appears to have subsided. The shift comes as a weaker US Dollar provided some relief to the precious metal, following softer-than-expected US inflation data for April.
Dollar Weakness Helps Gold Stabilize
Tuesday’s inflation figures showed softer-than-expected readings for both headline and core components, easing fears of an inflation shock from new tariffs. This prompted a broad-based “Risk On” sentiment, sparking rallies in equities and increasing expectations for potential Federal Reserve rate cuts later this year.
With no major economic data scheduled for Wednesday, market attention turned to geopolitical developments. President Donald Trump’s visit to Saudi Arabia, which resulted in $600 billion in trade deals, added to investor optimism. Meanwhile, hopes for peace talks between Ukraine and Russia remain uncertain as President Vladimir Putin has yet to confirm his attendance at a proposed meeting in Istanbul.
India’s Trade Deficit Impacted by Gold Prices
Gold’s recent rally is also impacting India’s trade balance. Analysts expect India’s April trade deficit to have narrowed to $18.9 billion, down from $21.5 billion in March, partly due to a decline in gold imports. High gold prices have dampened demand, contributing to the deficit reduction. Additionally, falling crude oil prices are expected to further lower import bills.
Despite the current weakness, UBS Asia Wealth Management Head Amy Lo noted that high-net-worth clients are increasingly diversifying away from US dollar assets into gold, cryptocurrencies, and Chinese investments. This shift could sustain gold demand in the medium term.
Technical Analysis: Gold in Consolidation Phase
From a technical perspective, gold is currently consolidating, forming a pattern of lower highs and higher lows. The key pivot level at $3,243 will be critical for any near-term recovery. A breakout above this could target resistances at $3,271 and $3,293, potentially paving the way for a retest of the $3,300 level.
On the downside, support at $3,222 held firm during Asian trading. Further declines may find support at $3,194, with a stronger floor around $3,167 if selling pressure resumes.
Outlook: Range-Bound for Now
While bearish pressures persist, the absence of new lows this week suggests that gold could remain range-bound in the near term. The next major catalyst will likely come from geopolitical developments and US economic data, which could determine the direction of the next breakout.
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