Gold prices are back on the rise early Thursday, challenging the $3,400 mark as renewed weakness in the US dollar and a resurgence in safe-haven demand boost investor sentiment.
Gold Price Driven by Trade and Geopolitical Risks
Market optimism continues to be driven by China’s recent cut in the Reverse Repo Rate and expectations surrounding US President Donald Trump’s likely announcement of a major trade deal. According to reports from The Wall Street Journal and The New York Times, Trump is expected to announce a framework of a trade deal with the UK later in the morning on Thursday.
However, this optimism has failed to lift sentiment around the US Dollar (USD), with the US Federal Reserve (Fed) expressing concerns over the growing economic uncertainties driven by Trump’s unpredictable trade policies. On Wednesday, the Fed decided to keep the federal funds rate unchanged, maintaining it in the range of 4.25% to 4.50%. The Fed’s policy statement indicated that the risks of higher inflation and unemployment had increased, clouding the economic outlook further.
During a press conference, Fed Chairman Jerome Powell noted, “It isn’t clear whether the economy will continue its steady growth or wilt under mounting uncertainty and a possible spike in inflation,” according to Reuters.
Geopolitical Tensions Fuel Safe-Haven Demand
Gold is also benefiting from increased safe-haven flows, spurred by ongoing geopolitical tensions. In the Middle East and between Russia and Ukraine, tensions remain high, with Russia’s air force reportedly launching guided bombs on the Sumy region in northern Ukraine early Thursday. This follows a three-day ceasefire declared by Russian President Vladimir Putin just hours earlier.
In Oman, a truce between Washington and the Houthis was brokered, although Houthi leaders have publicly refused to stop their attacks, continuing to fuel instability in the region.
In South Asia, tensions between India and Pakistan have escalated following missile strikes by the Indian military on nine terror targets in Pakistan and Pakistan-Occupied Kashmir. Heavy artillery exchanges have also been reported along the Line of Control (LoC), further contributing to the geopolitical risks.
Amid these uncertainties, gold remains a preferred safe-haven asset for investors seeking stability.
Upcoming US-Sino Trade Talks to Influence Gold Price
Gold prices are likely to remain well-supported as investors await the US-China trade talks scheduled to take place from May 9 to May 12 in Geneva. President Trump’s comments on May 7, stating that there was no possibility of retracting the 145% tariffs on Chinese goods, continue to add to the trade tensions. Any retracement in gold prices due to optimism over potential US trade deals will likely present a buying opportunity, as global policymakers deal with the economic fallout of Trump’s tariffs.
Gold Price Technical Outlook
Gold price is looking to regain the channel support, which has now turned into resistance, after finding renewed buying interest near $3,360. The 14-day Relative Strength Index (RSI) remains bullish, holding above the midline near 62, indicating that further upside potential exists.
For sustained upward momentum, gold must establish a firm foothold above the two-week high of $3,435. The next key upside target is the record high of $3,500. Should the price continue to rise, the channel resistance at $3,525 will likely be the next key level of interest for buyers.
On the downside, initial support is seen at $3,360, with the 21-day Simple Moving Average (SMA) at $3,301 serving as the next major support level. Deeper declines could test the May 2 low at $3,223.
As geopolitical tensions and trade uncertainties persist, gold continues to serve as a critical hedge for investors navigating these turbulent times.
