Gold showed signs of bullish exhaustion on Wednesday, as its retreat from the $3,500 peak stalled with dip-buying in the Asian session. The US Dollar (USD) failed to maintain its recovery from a multi-year low, influenced by weakening confidence in the US economy and President Donald Trump’s fluctuating stance on tariffs.
Trump administration officials suggested a potential easing of the US-China tariff dispute, while Trump backed down from threats to remove Federal Reserve (Fed) Chair Jerome Powell. These developments, coupled with improved geopolitical sentiment, have supported riskier assets and dampened demand for gold.
US-China Trade Optimism and Geopolitical Developments Drive Risk Appetite
US equity markets surged on Tuesday, bolstered by Trump’s reversal on Powell and positive comments about US-China trade talks. US Treasury Secretary Scott Bessent indicated that the tariff dispute could soon de-escalate, while White House spokeswoman Karoline Leavitt confirmed preparations for a trade deal.
Meanwhile, Russian President Vladimir Putin expressed openness to peace talks with Ukrainian President Volodymyr Zelenskyy, further improving global risk sentiment. These factors have curbed interest in safe-haven gold, leading to profit-taking following its recent record rally.
Fed Easing Expectations and Economic Data Awaited
Markets continue to price in the possibility of a Federal Reserve rate cut in June, with further easing expected by year-end. This has kept gold supported despite the overall decline in its price. Traders are now focused on the upcoming global flash PMIs for insights into global economic health, which could impact risk sentiment and influence gold’s price direction.
Technical Outlook: Gold Price Faces Key Levels of Support and Resistance
From a technical standpoint, gold has fallen below the 23.6% Fibonacci retracement level of its recent surge. This, along with the lack of further buying, suggests a potential pullback. However, daily oscillators remain in positive territory, signaling caution before making aggressive bearish bets. A further decline below $3,315 could find support near $3,289, with a break below this level potentially triggering a deeper correction.
On the upside, the $3,370 level is a key resistance point, with a potential rally towards $3,400. A sustained move beyond $3,424 could pave the way for gold to challenge the $3,500 psychological barrier, continuing its upward trend.
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