Gold prices continued their downward trend on Friday, falling below the $3,200 mark during the first half of the European trading session. The decline followed a modest recovery the previous day from just above $3,120—a more than one-month low. Investors’ optimism around a temporary trade truce between the United States and China appeared to reduce demand for traditional safe-haven assets such as gold, weighing heavily on its value despite lingering geopolitical tensions.
Interestingly, the US Dollar remained under pressure for the second consecutive day, driven by weaker-than-expected US macroeconomic data that increased market bets on upcoming interest rate cuts by the Federal Reserve. Treasury yields also slid in response. However, the non-yielding nature of gold prevented it from gaining any substantial support from these developments. Even heightened conflict in Gaza and continued tensions involving Russia and Ukraine failed to reverse the bearish mood dominating the gold market.
Easing Trade Tensions and US Economic Indicators Influence Market Mood
Recent developments in global trade negotiations have eased market anxieties. The US and China announced a major step forward in de-escalating trade tensions by agreeing to reduce tariffs and engage in a 90-day period to finalize broader trade agreements. This progress, coupled with President Biden’s ongoing negotiations with India, Japan, and South Korea, has brightened global risk sentiment, further reducing demand for safe-haven investments like gold.
Meanwhile, economic data from the US painted a mixed picture. The Producer Price Index dropped by 0.5% in April—the first monthly decline since 2023—while the Consumer Price Index rose at its slowest pace since February 2021. Retail sales edged up only 0.1% in April, following a strong 1.7% increase the previous month. The cumulative effect of this data reinforced expectations for additional Federal Reserve rate cuts this year and signaled the potential for sluggish economic growth ahead.
Despite the decline in bond yields and the weakening dollar, gold’s non-yielding nature has kept it from capitalizing on these dovish signals. Analysts note that, while such conditions typically support gold prices, the current risk-on sentiment driven by geopolitical diplomacy is counterbalancing these effects.
Technical Indicators Suggest Further Decline Possible
From a technical analysis perspective, gold’s rebound from the $3,120 area faltered near the $3,252–$3,255 zone, which aligns with the 200-period Simple Moving Average (SMA) on the 4-hour chart. Momentum indicators on the daily chart remain negative, suggesting that the recent recovery may not be sustainable without stronger buying momentum.
Should gold prices fail to hold the $3,178–$3,177 support level, further declines are likely, with the next downside targets near $3,120 and potentially down to the $3,100 and $3,060 levels. On the upside, reclaiming and maintaining levels above $3,255 could signal a reversal, possibly driving prices back toward the $3,300 threshold. A decisive move above that mark would shift the market’s bias toward the bullish side and pave the way for further gains.
For now, market participants remain cautious, closely watching both geopolitical developments and upcoming US economic indicators that could dictate the direction of gold prices in the near term.
