Gold (XAU/USD) has fallen sharply below the key psychological level of $3,150, pressured by a combination of global economic developments and shifting investor sentiment. Despite some supportive factors for the US Dollar, gold has struggled to attract sustained buying interest. This report explores the fundamental and technical dynamics currently shaping the gold market.
US-China Trade Truce Weakens Gold’s Safe-Haven Appeal
Optimism over a temporary trade truce between the United States and China has reduced gold’s attractiveness as a safe-haven asset. The agreement to pause tariffs for 90 days has eased fears of a global economic slowdown, pushing investors toward riskier assets.
US President Donald Trump’s willingness to negotiate directly with Chinese President Xi Jinping has further bolstered market confidence, diminishing recession concerns. This has also lowered expectations for aggressive Federal Reserve rate cuts.
Traders now price in just 50 basis points of Fed rate reductions for the year, down from a full percentage point expected earlier. This shift has pushed US Treasury yields to a one-month high, creating additional pressure on non-yielding assets like gold.
Fed officials have expressed caution. Vice Chair Philip Jefferson warned that tariffs could threaten inflation progress but noted policy flexibility. Chicago Fed President Austan Goolsbee highlighted the lagging nature of inflation data, advocating patience before policy adjustments.
The US Dollar remains mixed, with investors awaiting the upcoming Producer Price Index release and Fed Chair Jerome Powell’s speech, both poised to influence the dollar’s direction and gold’s price.
Technical Outlook: Bearish Signals Mount
Technically, gold has formed an ascending broadening wedge—a pattern often signaling bearish reversals. After months of gains, the price broke out of this wedge into a rising channel but has recently begun trending downward within that channel.
Gold is now testing the lower boundary of this descending channel and the key support near $3,140. A daily close below this level could accelerate selling pressure, potentially driving prices toward the next support around $3,040.
Earlier consolidation zones and minor rounding bottoms, which had supported upward moves, have failed to hold this time, reinforcing the bearish outlook. Volume trends may confirm the breakdown if selling intensifies, while the inability to reclaim $3,200 strengthens negative sentiment.
Conclusion
Gold’s fall below $3,150 reflects waning safe-haven demand amid easing trade tensions, diminished rate-cut expectations, and rising Treasury yields. With critical support at $3,140 in jeopardy, the risk of further declines remains high. Unless upcoming US data or Fed guidance shifts market dynamics, gold faces challenges in regaining upward momentum in the near term.
