Gold prices are expected to remain volatile in the short term, with investors closely tracking ongoing trade negotiations between the United States and China in London. Geopolitical tensions and mixed economic signals continue to shape sentiment around the precious metal.
On Monday, gold edged higher as the U.S. dollar weakened, with the MCX August gold futures contract trading at ₹97,200, up 0.16% on the day. This comes after spot gold slid 1.25% to close at $3,310 on Friday, following a better-than-expected U.S. non-farm payroll report for May, though underlying details in the jobs data remained concerning.
Despite two consecutive sessions of losses on June 5 and 6, gold ended the week 0.63% higher. The yellow metal had surged to $3,403 on June 5—its highest level since May 8—as demand for safe-haven assets increased amid heightened trade tensions between the world’s two largest economies.
High-Stakes US-China Trade Talks Underway
Top U.S. officials, including Treasury Secretary Bessent, Commerce Secretary Lutnick, and U.S. Trade Representative Greer, began negotiations with a Chinese delegation led by Vice Premier He Lifeng at London’s Lancaster House on Monday. Their presence signaled a willingness from the U.S. administration to offer concessions, such as easing restrictions on exports of technical equipment and jet engine parts. China is expected to reciprocate by relaxing controls on rare earth exports.
Fundamental Factors Supporting Gold
Gold-backed exchange-traded funds (ETFs) recorded net inflows for the second consecutive week as of June 6, lifting total global holdings to 88.394 million ounces—up 6.7% year-to-date. Rising ETF inflows often signal increased investor confidence in the metal as a store of value.
Meanwhile, China’s economic data continues to raise concerns. Consumer prices (CPI) in May fell 0.1% year-on-year, marking the fourth consecutive monthly decline. Producer prices (PPI) slumped 3.3% year-on-year, extending the country’s streak of factory-gate deflation to 32 months. Additionally, exports dropped 4.8% in May compared to a year earlier, significantly worse than April’s 8.1% rise, with shipments to the U.S. plunging by 34%.
Mixed US Jobs Report Raises Questions
The May U.S. non-farm payroll report showed employers added 139,000 jobs, exceeding forecasts of 126,000. Average hourly earnings rose more than expected, but deeper metrics revealed weaknesses: labor force participation fell sharply from 62.6% to 52.4%, and the household survey indicated a loss of 696,000 jobs. These discrepancies suggest underlying strain in the U.S. labor market despite the stable headline unemployment rate of 4.2%.
Market Watch: Key Economic Data Ahead
All eyes now turn to the upcoming release of U.S. inflation data—Consumer Price Index (CPI) on June 11 and Producer Price Index (PPI) on June 12—which will be pivotal in shaping the Federal Reserve’s interest rate trajectory.
At the time of writing, the U.S. Dollar Index stood at 98.95, down 0.24% on the day, while 10-year and 30-year Treasury yields hovered at 4.48% and 4.95%, respectively.
Positioning and Central Bank Moves
Weekly data from the U.S. Commodity Futures Trading Commission (CFTC) shows money managers increased their net bullish gold positions to a seven-week high as of June 3.
In a further show of support for gold, China’s central bank purchased another two tonnes in May—its seventh consecutive monthly acquisition—bringing its total gold reserves to 73.80 million ounces.
Price Forecast: Modest Downside Risks
According to Praveen Singh, Senior Fundamental Research Analyst–Currencies and Commodities at Mirae Asset Sharekhan, near-term gold prices will be heavily influenced by the outcome of the trade talks.
“If discussions result in tentative progress, gold may correct to test support around $3,292 (₹96,000),” Singh noted. “A more constructive outcome could push prices down further to $3,260 (₹95,000).”
Resistance levels are currently pegged at $3,365 (₹98,000) and $3,405 (₹99,200). A full resolution of the trade dispute appears unlikely in the immediate term, suggesting continued volatility.
Singh recommends cautious trading: “In this environment, a light sell position may be initiated with appropriate risk management in place, while closely monitoring geopolitical developments.”
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