Gold prices (XAU/USD) showed a slight recovery from the $3,300 mark, although the commodity continues to face intraday losses during the first half of the European session. This comes amid positive developments in tariff negotiations between the US and China, which have dampened the safe-haven demand for gold. Investors remain hopeful that these talks could lead to a de-escalation of trade tensions, which has contributed to the pressure on the precious metal. Additionally, a rebound in US Dollar (USD) buying further weighed on gold’s performance.
The market has been unsettled by US President Donald Trump’s fluctuating stance on trade policies, which has created additional uncertainty. However, the possibility of more aggressive policy easing by the Federal Reserve (Fed) could provide support for gold, which does not yield any income. Traders are also awaiting key US economic data this week, including the Fed’s preferred inflation gauge and the Nonfarm Payrolls (NFP) report, before positioning themselves for any potential market direction.
Market Movers: Risk Appetite Dents Safe-Haven Demand for Gold
China’s recent decision to exempt certain US goods from retaliatory tariffs signals a willingness to ease trade tensions between the two economic giants. Furthermore, US Treasury Secretary Scott Bessent stated that several major US trading partners had presented “very good” tariff proposals, further supporting market optimism. These developments have bolstered the positive risk tone in global markets, pushing flows away from safe-haven assets like gold.
Despite the optimistic trade outlook, uncertainty persists as mixed signals continue to emerge regarding the negotiations between the US and China. While President Trump indicated that trade talks were progressing, Chinese officials have denied that any official tariff discussions were taking place.
Meanwhile, traders are speculating that the Federal Reserve may resume its rate-cutting cycle as early as June. Current market expectations suggest at least three rate cuts by the end of the year, which could support gold as lower borrowing costs are seen as beneficial for the non-yielding metal.
Geopolitical Risks and Economic Data Awaited
Global geopolitical tensions remain in focus, particularly the ongoing conflict in Ukraine. Russian President Vladimir Putin announced a unilateral ceasefire for 72 hours starting May 8, though Ukrainian President Volodymyr Zelensky dismissed the truce. Additionally, North Korea’s involvement in the Russia-Ukraine conflict has kept the geopolitical risk premium intact.
As traders look for further direction, they are closely monitoring upcoming US economic data. The JOLTS Job Openings report on Tuesday, followed by the Personal Consumption Expenditures (PCE) report on Wednesday and the crucial Nonfarm Payrolls (NFP) report on Friday, could provide new insights into the Federal Reserve’s policy outlook.
Gold Price Technical Analysis: Caution Ahead of Potential Pullback
From a technical perspective, gold prices are showing signs of weakness below the $3,300-$3,290 region, which corresponds to the 38.2% Fibonacci retracement level of the recent upward movement. If gold fails to hold near the $3,265-$3,260 support zone, a break below this level could signal further bearish momentum. A sustained decline could drive the price towards the 50% retracement level around $3,225, with a potential drop to the $3,200 mark.
On the other hand, if gold prices manage to break through the immediate resistance at the $3,348-$3,353 region, followed by the $3,366-$3,368 zone, the commodity could target the $3,400 level. A sustained bullish trend may extend toward the $3,425-$3,427 region, with a possible attempt to reclaim the psychological $3,500 mark in the near future.