- Gold price meets with a fresh supply on Monday amid the US-China trade deal optimism.
- A fall in China’s gold consumption and a modest USD uptick also weigh on the commodity.
- Trade-related uncertainties and Fed rate cut bets warrant caution for the XAU/USD bears.
Gold price (XAU/USD) attracts fresh sellers at the start of a new week and drops to the $3,268-3,267 area, back closer to Friday’s swing low, during the Asian session. Despite mixed signals from the US and China, investors remain hopeful over the potential de-escalation of trade tensions between the world’s two largest economies. Apart from this, a fall in China’s gold consumption in the first quarter of 2025 turned out to be a key factor subsiding demand for the traditional safe-haven bullion.
Meanwhile, the US Dollar (USD) struggles to build on last week’s strong recovery gains from a multi-year low – marking its first weekly gain since March. Prospects of Fed rate cuts and ongoing geopolitical risks could cushion the Gold price. Hence, it will be prudent to wait for strong follow-through selling before positioning for any meaningful corrective decline from the all-time peak touched last Tuesday.
Daily Digest Market Movers: Gold price is pressured by receding safe-haven demand; downside seems cushioned
- China has exempted some U.S. imports from its 125% tariffs imposed earlier this month in response to the 145% US tariffs on Chinese imports. This comes on top of US President Donald Trump’s reassertion that trade talks were underway with China and fuels hopes for a quick de-escalation of trade war between the world’s two largest economies.
- China has yet to confirm any exemptions and denies ongoing tariff talks. Meanwhile, Trump’s shifting announcements and global recession fears sustain demand for the safe-haven Gold price.
- The China Gold Association said on Monday that the country’s gold consumption fell 5.96% year-on-year to 290.492 tonnes in the first quarter of 2025. Moreover, high prices continued to curb demand for gold jewelry, which slumped 26.85% year-on-year to 134.531 tonnes. Meanwhile, consumption of gold bars and coins surged 29.81% to 138.018 tonnes.
- The US Dollar preserves last week’s recovery gains, though it lacks follow-through amid bets that the Federal Reserve will resume its rate-cutting cycle in June and lower borrowing costs by one full percentage point in 2025. Moreover, geopolitical risk remains in play amid the protracted Russia-Ukraine war, which limits losses for the precious metal.
- North Korea has confirmed for the first time that it has sent troops to fight in the Russia-Ukraine conflict. Trump urged Russia on Sunday to stop its attacks in Ukraine while US Secretary of State Marco Rubio said that the US might walk away from peace efforts if it does not see progress. This, in turn, warrants some caution for the XAU/USD bears.
- Investors this week will confront the release of key US macro data, including the JOLTS job openings report on Tuesday, US Personal Consumption Expenditures on Wednesday, and the non-farm payrolls (NFP) report on Friday. The data may provide more insight into the Fed’s policy outlook and provide some meaningful impetus to the commodity.
Gold price bears need to wait for some follow-through selling below $3,265-3,260 before placing fresh bets
From a technical perspective, bearish traders need to wait for acceptance below the 38.2% Fibonacci retracement level of the latest leg up from the vicinity of mid-$2,900s, or the monthly swing low before placing fresh bets. Some follow-through selling below the $3,265-3,260 immediate support will confirm a breakdown and make the Gold price vulnerable to extend its recent corrective decline from the $3,500 psychological mark, or the all-time peak. The subsequent downfall could drag the precious metal to the 50% retracement level, around the $3,225 region, en route to the $3,200 mark. A convincing break below the latter will suggest that the commodity has topped out in the near term.
On the flip side, attempted recovery back above the $3,300 mark might confront some resistance near the Asian session high, around the $3,331-3,332 region. Any further move up might still be seen as a selling opportunity and remain capped near the $3,366-3,368 supply zone. The latter should act as a key pivotal point, which if cleared decisively should allow the Gold price to reclaim the $3,400 mark. The momentum could extend further toward the $3,425-3,427 intermediate hurdle before bulls make a fresh attempt to conquer the $3,500 psychological mark.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Source: https://www.fxstreet.com/news/gold-price-languishes-below-3-300-last-weeks-swing-low-holds-the-key-for-bulls-202504280434