- Gold price struggles to preserve modest intraday gains, though the downside remains cushioned.
- Fed rate cut bets and US fiscal concerns should cap the USD recovery and support the commodity.
- Geopolitical risks and persistent trade-related uncertainties could further underpin the XAU/USD.
Gold price (XAU/USD) seesaws between tepid gains/minor losses heading into the European session on Wednesday, though it remains close to a nearly four-week high touched the previous day. The US Dollar (USD) preserves the overnight recovery gains from a six-week low amid hopes for potential talks between President Donald Trump and Chinese President Xi Jinping. This, along with a generally positive tone around the equity markets, turns out to be a key factors acting as a headwind for the precious metal.
Investors, however, remain on edge amid persistent trade-related uncertainties and persistent geopolitical risks. Furthermore, concerns about the worsening US fiscal condition might keep a lid on the market optimism and lends some support to the XAU/USD pair. Meanwhile, expectations that the Federal Reserve (Fed) will stick to its easing bias and lower borrowing costs further in 2025 hold back the USD bulls from placing aggressive bets, which should help limit the downside for the non-yielding yellow metal.
Daily Digest Market Movers: Gold price bulls remain on the sidelines amid mixed fundamental cues
- The Job Openings and Labor Turnover Survey (JOLTS) released on Tuesday showed that there were 7.39 million job openings on the last business day of April. The reading exceeded expectations of 7.1 million and also surpassed the 7.2 million openings recorded in March. The data pointed to the continued resilience of the US labor market and bolsters optimism regarding the health of the economy.
- Despite the upbeat data, the US Dollar faced some pressure from declining US Treasury bond yields and bets that the Federal Reserve (Fed) will deliver at least two 25 basis points rate cuts by the end of this year. Moreover, concerns that the US budget deficit could worsen at a faster pace than expected on the back of US President Donald Trump’s flagship tax and spending bill weigh on the Greenback.
- Atlanta Fed President Raphael Bostic said on Tuesday that he is ‘very cautious’ about jumping to cutting rates and that the best monetary policy approach now entails ‘patience’. Bostic added that there is still a way to go on inflation as core prices are still an issue and that recession is not in his forecast right now, though he sees a possible path to one interest rate cut this year, depending on the economy.
- Meanwhile, Chicago Fed President Austan Goolsbee noted that a slowdown related to tariffs might not show up for a while in the data. All indicators point to stable and full employment and we have to wait and see if tariffs have a big or small inflation impact, Goolsbee added further.
- Separately, Fed Board of Governors member Lisa Cook said that the trade policy is now affecting the economy and may make it harder to get inflation lower. Cook expects increased inflation and reduced activity because of tariffs and warned that tariffs could lead to a stagflation environment. The Fed’s monetary policy is well-positioned for a range of scenarios, Cook added further.
- Trump and Chinese President Xi Jinping are expected to hold a call this week, likely on Friday, amid renewed fears of a trade war between the world’s two largest economies. Furthermore, the increase in steel and aluminum import tariffs from 25% to 50% come into effect on Wednesday. This keeps the trade-related risk premium in play and offers some support to the safe-haven Gold price.
- Traders now look forward to the release of the US ADP report on private-sector employment and the US ISM Services PMI. Apart from this, speeches from influential FOMC members will drive the USD demand and provide some meaningful impetus to the XAU/USD pair. The focus, however, remains glued to the official monthly jobs data, popularly known as the Nonfarm Payrolls (NFP) report.
Gold price could accelerate the positive momentum once the $3,400 mark barrier is cleared decisively
From a technical perspective, the emergence of dip-buying on Wednesday comes on top of this week’s breakout through the $3,324-3,326 barrier. Moreover, oscillators on daily/hourly charts are holding comfortably in positive territory and suggest that the path of least resistance for the Gold price is to the upside. However, any subsequent move up could face some resistance near the $3,380 region ahead of the $3,400 neighborhood or a multi-week high touched on Tuesday. A sustained strength beyond the latter should allow the XAU/USD pair to retest the all-time peak touched in April and make a fresh attempt to conquer the $3,500 psychological mark.
On the flip side, weakness below the $3,355 area might continue to attract some dip-buyers and is more likely to remain limited near the aforementioned resistance breakpoint, around the $3,326-3,324 area. Some follow-through selling, however, could make the commodity vulnerable to weakening further below the $3,300 mark and testing the $3,286-3,285 horizontal support.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
