Gold prices (XAU/USD) recovered between 20% and 30% from early Thursday lows, trading just below the $3,150 mark during the early European session. Despite this rebound, the precious metal remains down approximately 1% for the day. The US Dollar (USD) has struggled to attract significant buying interest as investors await the release of the US Producer Price Index (PPI) and Federal Reserve Chair Jerome Powell’s scheduled remarks later today.
A shift in global risk sentiment, evidenced by a notable decline in equity markets, has provided some support to gold. However, optimism stemming from the easing of trade tensions between the United States and China—the world’s two largest economies—continues to weigh on the metal’s appeal. Additionally, expectations of a less aggressive Federal Reserve monetary easing, fueled by reduced recession fears in the US, have pressured gold prices lower for a second consecutive day. Market participants remain cautious, awaiting clear buying momentum before concluding that gold’s recent corrective drop from its all-time peak has ended.
Market Movers and Geopolitical Developments
US President Donald Trump signaled progress in negotiations with Iran on Thursday, stating that Iran has agreed to terms and expressing hope for a successful deal. Trump also mentioned the possibility of attending Russia-Ukraine peace talks in Turkey on Friday if appropriate. These diplomatic advances contribute to a broader atmosphere of easing tensions, alongside the recent US-China agreement to suspend steep tariffs for at least 90 days.
Trump further indicated on Tuesday his willingness to negotiate directly with Chinese President Xi Jinping on the details of a trade pact. These developments have eased fears of a downturn in the global economy, driving gold prices to a one-month low on Thursday amid expectations of fewer interest rate cuts by the Federal Reserve.
Traders have reduced their bets on Fed rate cuts for 2024 to just over 50 basis points, down from more than a full percentage point priced in last month. This shift has lifted the benchmark 10-year US Treasury yield to a one-month high.
Federal Reserve Officials Signal Cautious Approach
Federal Reserve Vice Chair Philip Jefferson cautioned that ongoing tariffs and trade policy uncertainty could undermine progress on inflation control. He noted recent inflation data shows continued movement toward the Fed’s 2% target and described current policy as well-positioned to respond to emerging economic developments.
Chicago Fed President Austan Goolsbee emphasized the lagging nature of some April inflation data and urged patience, suggesting the Fed should wait for clearer signals before making policy changes. San Francisco Fed President Mary Daly echoed this sentiment, highlighting the strength of the US economy and labor market, and indicating that inflation is trending downward. Daly advocated for a moderate, data-driven approach to adjusting interest rates amid ongoing uncertainty.
Meanwhile, US Dollar bulls remain cautious ahead of today’s PPI release and Fed Chair Powell’s remarks, both of which are expected to provide fresh direction for the USD and influence gold’s price trajectory.
Geopolitical Tensions Continue
Ukrainian President Volodymyr Zelenskyy confirmed his attendance at the first peace talks with Russia in Istanbul on Thursday, though the Kremlin announced Russian President Vladimir Putin will not participate. In the Middle East, the Israeli military intercepted a missile launched from Yemen on Wednesday, and intense Israeli airstrikes in Gaza reportedly killed up to 80 people, underscoring ongoing geopolitical risks. However, these tensions have so far had limited impact on gold prices.
Technical Outlook: Bears Maintain Control Below Key Support
From a technical standpoint, gold’s overnight fall below the $3,200 level and the critical 61.8% Fibonacci retracement of April’s rally signals renewed bearish momentum. Daily chart oscillators have begun to turn negative, suggesting further downside potential toward support levels around $3,135 to $3,133. Continued selling pressure could push gold toward the $3,100 mark, with a break below that potentially exposing a more significant support near $3,060.
On the upside, any recovery above the $3,168 to $3,170 zone faces strong resistance near $3,200, corresponding to the Asian session’s peak. A rally beyond this could encounter selling interest near $3,230, aligned with the 50% retracement level. Surpassing this would mark a crucial turning point, possibly triggering short-covering that could propel gold toward an intermediate hurdle at $3,265 and eventually the $3,300 psychological level, near the 38.2% Fibonacci retracement.
