Gold prices (XAU/USD) corrected to near $3,290 during Thursday’s North American session, following a new all-time high of $3,358 earlier in the day. Profit-taking and positive progress in U.S. trade talks with Japan and Mexico offered relief, easing concerns over global economic instability. However, ongoing U.S.-China trade tensions continue to provide support for the precious metal’s price.
In a post on Truth.Social, U.S. President Donald Trump touted his productive discussions with Mexico and Japan, stating, “Every nation, including China, wants to meet! Today, Italy!” The diplomatic activity signals a shift towards bilateral trade deals, with Trump using tariffs to gain leverage, which has helped reduce global market uncertainty.
Despite these positive developments, the U.S.-China trade war remains a major factor in market sentiment, keeping risk appetite low. Precious metals traditionally perform well in times of heightened global economic tension.
The trade standoff between the U.S. and China has escalated into a battle over prestige. The U.S. insists China must initiate talks, while China seeks respect and mutual benefit in negotiations. White House Press Secretary Karoline Leavitt stated, “The ball is in China’s court: China needs to make a deal with us, we don’t have to make a deal with them.”
Gold Price Corrects as USD Gains Ground
After reaching an all-time high of $3,358, investors cashed in on gold’s gains, causing a slight price correction. A modest recovery in the U.S. Dollar (USD) also contributed to the decline. The U.S. Dollar Index (DXY), which measures the Greenback’s strength against six major currencies, rose from a three-year low of 99.00 to 99.45 at the time of writing.
Trump’s preference for trade talks over tariffs has helped alleviate some global uncertainty, leading to a minor recovery in the U.S. Dollar. A stronger dollar typically makes gold more expensive for investors, putting downward pressure on the precious metal’s price.
The U.S. Dollar Index had faced significant selling pressure in recent months, as markets grew concerned about the impact of Trump’s tariffs on U.S. economic growth. Higher tariffs were expected to fuel inflation and slow economic expansion.
Additionally, Federal Reserve Chair Jerome Powell’s recent comments at the Economic Club in Chicago provided some support for the U.S. Dollar. Powell noted that despite risks, the U.S. economy remains solid. “The U.S. economy is solid despite heightened uncertainty,” he said, signaling that the Fed may hold off on policy changes for now.
However, Trump has been critical of Powell, calling him “too late and wrong.” In a post on Truth.Social, Trump accused Powell of misjudging the economy, while also criticizing the European Central Bank (ECB) for anticipated rate cuts.
Technical Analysis: Gold Faces Key Support Levels
Gold’s price correction has extended below $3,300 after hitting a record high earlier in the day. However, the overall outlook remains bullish, as short-to-long-term Exponential Moving Averages (EMAs) are all sloping upward, signaling continued positive momentum.
The 14-day Relative Strength Index (RSI) is above 70.00, indicating strong bullish momentum, although some short-term consolidation could be expected.
On the downside, the 20-day EMA, around $3,135.50, will serve as a critical support level. On the upside, $3,400 will act as a key resistance zone.