Gold Price Struggles Below $3,300 as US-China Trade Hopes Weigh; Fed Cut Bets Offer Limited Support.
Gold (XAUUSD) faced renewed selling pressure on Monday, slipping toward the key $3,260-$3,265 support zone as optimism over a potential US-China trade deal and a modest rebound in the US Dollar (USD) dampened demand for the precious metal. Early European session trading kept gold under a bearish tone, marking the second straight day of declines, as traders digested a mix of trade headlines, geopolitical risks, and shifting central bank expectations.
However, underlying uncertainty surrounding the Federal Reserve’s (Fed) monetary policy path and persistent geopolitical tensions could still act as a backstop for gold prices, limiting deeper declines in the near term.
Trade Hopes Dent Gold’s Safe-Haven Appeal
The primary driver weighing on gold prices Monday was renewed optimism surrounding US-China trade relations. Over the weekend, US President Donald Trump signaled that negotiations with China were progressing, stating that discussions were ongoing despite the sharp tariff escalations announced earlier this month. In a goodwill gesture, China announced exemptions for some US imports from the harsh 125% retaliatory tariffs it had imposed.
Although China’s foreign ministry later denied any ongoing tariff negotiations, market sentiment remained buoyant. Investors viewed the US administration’s softer tone as a sign that both sides are willing to de-escalate tensions, reducing the need for safe-haven assets like gold.
The development, while tentative, comes as a relief to global markets rattled by fears of an extended trade war between the world’s two largest economies. As trade tensions ease, risk appetite tends to rise, decreasing the attractiveness of non-yielding, safe-haven assets like gold.
China’s Falling Gold Consumption Adds to Downward Pressure
Adding to the negative bias around gold was fresh data out of China, the world’s largest gold consumer. According to the China Gold Association, total gold consumption in the first quarter of 2025 fell 5.96% year-over-year to 290.492 tonnes.
Demand for gold jewelry—a traditionally large segment—was particularly weak, plunging 26.85% to 134.531 tonnes, as sky-high gold prices deterred consumer purchases. Interestingly, the demand for gold bars and coins surged nearly 30% over the same period, suggesting that Chinese investors sought to hedge against broader economic uncertainties even as jewelry buying collapsed.
Nonetheless, the overall fall in China’s gold consumption painted a bearish picture for global demand, amplifying downward pressure on XAU/USD.
Modest US Dollar Strength Caps Gold Gains
Gold’s struggles were compounded by a modest uptick in the US Dollar, which preserved last week’s recovery momentum. Although the greenback’s advance lacked strong follow-through—due to expectations that the Fed will soon resume its rate-cutting cycle—it was sufficient to drag gold lower.
Markets are now pricing in at least a 100-basis-point reduction in US interest rates over the course of 2025, beginning potentially as early as June. Lower borrowing costs tend to weigh on the USD and bolster gold prices. However, in the short term, gold’s inverse relationship with the dollar remains dominant, leaving the metal vulnerable to even modest USD strength.
Geopolitical Tensions Offer Some Support
Despite the bearish pressures from trade and currency markets, geopolitical tensions helped limit gold’s downside. Notably:
- North Korea confirmed for the first time that it has sent troops to support Russia in the ongoing conflict in Ukraine.
- President Trump called on Russia to halt attacks, while US Secretary of State Marco Rubio warned that the US might abandon peace efforts if no progress is seen.
These developments underscore a fragile and volatile global backdrop, encouraging some investors to maintain allocations in traditional safe-haven assets like gold.
Additionally, ongoing wars, economic uncertainty in Europe, and concerns over a potential global recession provide undercurrents of support for XAU/USD, suggesting that any deeper pullback might be shallow and short-lived.
Key US Data Ahead: A Potential Game-Changer?
Looking ahead, investors will closely watch a slew of high-impact US economic data releases this week, which could offer further cues about the Fed’s policy direction and, by extension, the future path of gold prices:
- Tuesday: US Job Openings and Labor Turnover Survey (JOLTS) report
- Wednesday: US Personal Consumption Expenditures (PCE), the Fed’s preferred inflation gauge
- Friday: The highly anticipated Non-Farm Payrolls (NFP) report
Weaker-than-expected data would likely reinforce expectations for aggressive Fed rate cuts, weighing on the USD and supporting gold. Conversely, resilient economic numbers could bolster the greenback and deepen the pressure on XAU/USD.
Technical Analysis: Gold at a Crucial Juncture
From a technical standpoint, gold’s inability to hold above $3,300 and its proximity to the $3,260-$3,265 support zone make this a crucial period for price action.
- Immediate support sits around $3,260, a decisive break below which could open the door for a deeper correction toward the $3,220-$3,210 zone.
- On the flip side, any meaningful recovery attempts are likely to confront resistance near the $3,300 psychological mark, followed by the $3,320-$3,325 area.
- Momentum indicators on the daily chart have turned lower but are yet to flash extreme oversold signals, suggesting room for either consolidation or a mild rebound before the next directional move.
Conclusion: Cautious Optimism, But Risks Linger
Gold prices are currently caught between conflicting forces: optimism over easing trade tensions and moderate USD strength versus geopolitical risks and Fed policy uncertainty. While the short-term bias has shifted lower, broader market risks and the Fed’s expected dovish pivot later this year may keep gold from experiencing a deeper crash.
Until clear trends emerge from upcoming US data, traders should approach gold with caution, recognizing that sentiment can turn swiftly in either direction.
