Gold Price Under Pressure as Trade Optimism and Hawkish Fed Weigh on XAU/USD

XAU/USD continues its downward trend, slipping below $3,300 amid trade optimism and a stronger USD

Summary

Gold prices continue their downward trend, slipping below $3,300 amid trade optimism and a stronger USD. While easing geopolitical tensions add to market confidence, lingering risks and Fed policy discussions keep investors cautious.

Market Overview: Gold Prices Face Pressure

Gold (XAU/USD) extended its losses for the third consecutive day during the Asian session on Friday, breaching the $3,300 mark. Market sentiment turned optimistic after the announcement of a US-UK trade deal and progress in US-China negotiations. This optimism diminished the appeal of safe-haven assets like gold.

Additionally, the Federal Reserve’s hawkish stance has strengthened the US Dollar, adding further pressure on gold prices. The USD climbed to a four-week high, reducing demand for non-yielding assets like gold.

Key Drivers Behind Gold’s Decline

1. Trade Optimism:

   • The US-UK trade deal raised hopes for further agreements, boosting market sentiment.

   • Planned reductions in US-China tariffs also contributed to a positive risk outlook.

2. Stronger USD:

   • The Federal Reserve signaled no imminent rate cuts, bolstering the greenback.

   • A strong USD typically weighs on gold prices due to their inverse relationship.

3. Geopolitical Risks:

   • Despite easing trade tensions, risks from the Russia-Ukraine conflict and the Middle East remain.

   • Escalation along the India-Pakistan border continues to support some safe-haven demand.

Technical Outlook

Gold prices recently fell through the $3,260 support level, confirming bearish momentum. However, the decline faces potential support near the $3,265-3,264 zone. A breakdown below this area could accelerate losses towards $3,223-3,222 or even the $3,200 mark.

On the upside, resistance is seen at $3,324 and stronger barriers near $3,360-3,365. Sustained strength above these levels might push prices towards $3,400 or $3,435.

Conclusion and Risk Warnings

Gold prices remain under pressure due to reduced safe-haven demand and a robust USD. Investors should monitor geopolitical developments and Federal Reserve speeches for further market cues. While short-term support levels provide stability, a deeper downtrend remains a possibility.

Recommendations:

• Stay updated on trade negotiations and Federal Reserve policies.

• Consider hedging strategies against potential downside risks.

• Avoid aggressive positions amid uncertain geopolitical and economic conditions.