Gold prices (XAU/USD) dropped to approximately $3,335 during the early Asian session on Tuesday, facing downward pressure as the US Dollar (USD) rebounded slightly and trade tensions between the United States and China showed signs of softening.
On Friday, China exempted some US imports from its 125% tariffs, sparking hopes that the prolonged trade war between the two countries could be nearing a resolution. However, US President Donald Trump’s statement suggesting ongoing trade negotiations was quickly refuted by Chinese officials, adding uncertainty to the situation.
US Treasury Secretary Scott Bessent noted on Monday that while the US is in contact with China, it is up to Beijing to take the first step in reducing the tariff dispute, citing the trade imbalance between the two nations. As fears of an escalating trade war ease, demand for traditional safe-haven assets like gold diminished, further weighed down by a stronger US Dollar.
Tim Waterer, Chief Market Analyst at KCM Trade, commented, “Comments last week from the White House have fueled optimism that a US-China trade deal may eventuate, which has caused safe-haven demand for assets such as gold to subside.”
Fed Rate Cut Expectations Support Gold in Face of Stronger Dollar
Despite the pressure from a rising USD, expectations that the Federal Reserve may resume its rate-cutting cycle at its June meeting offer some support for gold, as lower interest rates tend to benefit non-yielding assets like the yellow metal. However, the Fed remains in its blackout period ahead of the Federal Open Market Committee (FOMC) meeting scheduled for May 7, limiting any immediate clarity on its next moves.
Key Data to Watch: Q1 GDP and Employment Reports
Traders are now focusing on the upcoming US Q1 GDP report and April employment data, which could provide valuable insights into the Fed’s future policy decisions and the broader US economic outlook. Analysts expect the US economy to add 135,000 jobs in April, with the Unemployment Rate holding steady at 4.2%. A weaker-than-expected outcome in these reports could lead to a decline in the US Dollar, which in turn could drive gold prices higher in the near term.