Gold prices are trading in a tight range below the $3,400 mark early Thursday, as traders weigh renewed geopolitical concerns against cautious optimism surrounding global trade developments. The yellow metal continues to consolidate after a moderate recovery earlier in the week, with market participants avoiding large directional bets ahead of key economic data and potential developments in international diplomacy.
At last check, spot gold (XAU/USD) was hovering near $3,372 per ounce, struggling to extend gains despite simmering geopolitical tensions and disappointing U.S. economic indicators. The prospect of progress on trade discussions between the United States and key global partners, including China, appears to be capping immediate safe-haven demand.
Geopolitical Uncertainty Versus Trade Optimism
Traders remain caught between two opposing forces. On one hand, geopolitical instability—particularly the risk of further escalation in the Russia-Ukraine conflict—is lending support to gold. On the other, news of potential breakthroughs on several trade fronts has helped buoy investor sentiment and stabilize the U.S. dollar, tempering gold’s upward momentum.
Renewed hopes of a U.S.-China diplomatic dialogue gained traction after reports surfaced of a potential phone call between U.S. President Donald Trump and Chinese President Xi Jinping on Friday. At the same time, constructive developments in U.S.-Canada and EU-U.S. trade relations have reinforced investor optimism, prompting a modest rebound in the greenback following Wednesday’s sharp drop.
However, geopolitical risks remain front and center. Ukraine reportedly launched a surprise drone strike on Russian military airbases on June 1, targeting long-range bombers with alleged nuclear capabilities. In response, Russian President Vladimir Putin dismissed any immediate possibility of a ceasefire and vowed retaliation. After speaking with Putin, Trump noted that Russia would “have to respond” to the attacks—raising fears of renewed military escalation and potentially triggering a flight to safety that could benefit gold.
Weak U.S. Data Fuels Dovish Fed Expectations
Meanwhile, investors are still digesting a series of weak U.S. economic indicators, which are reinforcing expectations of a dovish pivot from the Federal Reserve. According to ADP data released Wednesday, the U.S. private sector added just 37,000 jobs in May—well below the consensus forecast of 115,000 and down from April’s downwardly revised 60,000. Additionally, the ISM Services PMI unexpectedly slipped into contraction territory, falling to 49.9 from 51.6 in April.
These figures, pointing to a slowdown in both labor market momentum and service sector activity, have led markets to increase bets on a Fed rate cut as early as September. The prospect of lower interest rates typically benefits non-yielding assets like gold by reducing the opportunity cost of holding them.
However, the U.S. dollar has managed a mild recovery, limiting gold’s short-term gains. Traders now await speeches from several Federal Reserve officials and the latest weekly jobless claims data for further clues about the central bank’s policy trajectory.
Technical Outlook: Bulls Await Break Above $3,377
From a technical standpoint, gold’s near-term outlook remains cautiously bullish, provided it maintains key support levels.
On the daily chart, the 21-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement of the April rally—both converging near $3,297—offer a crucial support base. As long as this zone holds, bulls may remain in control. The 14-day Relative Strength Index (RSI) is also trending above the neutral 50 mark, suggesting continued positive momentum.
For bullish continuation, gold must achieve a daily close above the 23.6% Fibonacci resistance level at $3,377. A successful breach would open the path to challenge the May high near $3,439, with the ultimate target remaining the all-time high of $3,500 set in April.
On the flip side, a break below immediate support at $3,322—defined by a previously breached trendline now acting as support—could shift the balance in favor of sellers. A deeper correction could test the key confluence at $3,297. Further downside targets include $3,240, where the 50% Fibonacci level aligns with the 50-day SMA.
Outlook
While gold prices remain rangebound for now, the combination of geopolitical risks, faltering U.S. data, and uncertain Fed policy continues to create a supportive macro backdrop for the metal. A decisive move in either direction will likely require new catalysts, such as Friday’s U.S. Nonfarm Payrolls report or an outcome from the Trump-Xi phone call.
Until then, gold remains in a consolidation phase, caught between short-term dollar fluctuations and longer-term structural concerns favoring continued safe-haven demand.
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