Gold prices reversed their gains from Thursday, slipping below the $3,300 mark amid a strengthening US dollar and a lack of momentum in the precious metal despite declining US Treasury yields. Gold was trading at $3,294, down more than 1.60%, following a brief period of optimism over the potential de-escalation of the US-China trade war.
The shift in sentiment came after reports that China was considering exempting some US products from tariffs, which initially sparked positive reactions from traders. However, US President Donald Trump’s subsequent comments—stating that tariffs would remain unless China offered concessions—dampened enthusiasm and caused gold prices to fall.
While the US dollar pared some of its recent gains, the Dollar Index (DXY) remained up by 0.23% at 99.51, preventing gold from regaining any significant ground. Traders were also seen booking profits ahead of the weekend, adding to the downward pressure on gold.
Meanwhile, US consumer sentiment worsened in April, with the University of Michigan’s latest report showing the fourth-lowest reading since the late 1970s. The decline in consumer sentiment, coupled with ongoing economic uncertainty, contributed to market volatility, as investors remained uncertain about future economic conditions.
Traders are now looking ahead to next week’s economic data, including the US Job Openings and Labor Turnover Survey (JOLTS) for March, the first quarter 2025 GDP report, the ISM Manufacturing PMI, and April’s Nonfarm Payrolls figures.
As for the Federal Reserve’s interest rate decision, traders are largely expecting the central bank to hold rates steady at its upcoming meeting, with a 92% chance of no change, according to Prime Market Terminal. However, traders anticipate a rate cut by the end of the year, with expectations for the fed funds rate to reach 3.45%, representing a reduction of 86 basis points.
Market Movers: US Dollar Stays Strong Despite Treasury Yield Decline
The yield on the US 10-year Treasury note decreased by five basis points, falling to 4.266%. Meanwhile, US real yields on Treasury Inflation-Protected Securities (TIPS) dropped by four and a half basis points, reaching 1.968%.
April’s University of Michigan Consumer Sentiment Index also showed a decline, dropping from 57 to 52. Consumer inflation expectations for the next year rose from 5% to 6.5%, while the five-year outlook increased from 4.1% to 4.4%.
On Thursday, Cleveland Fed President Beth Hammack noted that the Federal Reserve could take action as early as June, depending on incoming data, but emphasized the ongoing uncertainty affecting business planning and economic forecasts.
Gold Technical Outlook: Downward Pressure as Key Support Levels Loom
Gold’s uptrend remains intact, but the precious metal is currently struggling to hold above the $3,300 level, with buyers hesitant to push prices past $3,400. The Relative Strength Index (RSI) indicates that buying momentum is waning, suggesting that gold could face further downward pressure.
The first key support level is $3,250, and a break below this could lead to a test of the April 3 peak at $3,167, followed by the 50-day Simple Moving Average (SMA) at $3,041.
On the upside, if buyers manage to reclaim the $3,300 level, the next resistance point will be the April 22 high at $3,386. If gold can surpass this, the next key resistance levels will be $3,400, $3,450, and $3,500.