Gold suffers its third day of losses as EU-US trade prospects firm, US-China talks take focus
- Gold extends losses as safe-haven demand slips, risk appetite improves.
- US Dollar firms on rising yields, US economic data, and easing trade tensions support gains.
- XAU/USD falls to triangle support below $3,350.
The US Dollar firms on rising yields, robust economic data, and easing trade tensions, supporting gains.
Gold is trading lower on Friday as risk appetite improves, trade tensions ease, and the US Dollar firms.
At the time of writing, XAU/USD is hovering near $3,340, weighed down by rising US Treasury yields and fading demand for safe-haven assets.
Robust earnings, resilient macro data, and fading demand for safe-haven assets have all weighed on Bullion this week. Physical demand from Asia remains subdued, while broader market stability has limited upside for the yellow metal. From a technical view, sellers appear to be regaining control, with Gold easing back from earlier highs near $3,349.
Gold remains sensitive to trade talks as risk sentiment shifts
The easing of global trade tensions has been a central driver of this week’s pullback in Gold. US President Donald Trump has signaled that countries offering greater access to US markets could receive preferential tariff treatment, citing the recently concluded Japan trade agreement as a model for ongoing negotiations with the European Union.
Under the proposed deal, most EU goods would face a 15% baseline tariff, a notable reduction from the 30% rate scheduled to take effect on August 1 if no agreement is reached.
Attention is also turning to next week’s high-stakes US–China trade talks. Treasury Secretary Scott Bessent will meet Chinese Vice Premier He Lifeng in Stockholm between Sunday and Tuesday to discuss extending the current tariff truce, which is set to expire on August 12.
Under the current agreement, tariffs on US imports of Chinese goods are subject to a 55% total tariff rate, while Chinese imports of US goods face a levy of 10%. The 55% tariff rate consists of a 10% baseline tariff, a 20% "fentanyl" tariff, and a 25% Section 301 tariff. The upcoming meetings in Stockholm will focus on potentially extending this truce and addressing other economic issues.
Should talks collapse, tariff rates would revert to 145% on Chinese imports and 125% on US exports, a development that could trigger a sharp deterioration in risk sentiment and reignite safe-haven demand for Gold.
Meanwhile, Chinese Commerce Minister Wang Wentao has expressed support for improving trade ties with the US, noting the mutual interest in restoring long-term economic stability. His comments helped ease market fears earlier in the week, reinforcing the broader risk-on environment.
Gold daily digest market movers: US employment data and Fed expectations keep pressure on Bullion
- Durable Goods Orders data on Friday came in above analyst expectations, although the report was negative. The report tracks new orders for long-lasting manufactured goods and is a closely watched proxy for business investment and economic momentum. The June print reflected a decline of 9.3%, below estimates of a 10.8% contraction but far below the 16.5% increase in May.
- On Thursday, US Initial Jobless Claims fell to 217,000, marking a sixth consecutive weekly decline and the lowest level since April. The report reinforced the strength of the US labor market and reduced pressure on the Fed to act quickly on rate cuts.
- A resilient jobs backdrop supports higher yields and the US Dollar, putting pressure on non-yielding assets, such as Gold.
- According to the CME FedWatch Tool, markets are now pricing in a 62.3% probability of a 25-basis-point rate cut in September, while the likelihood of no change stands at 36.1%. Although at least one rate cut remains priced in this year, recent Fed commentary suggests growing caution.
- The Minutes of the June Federal Open Market Committee (FOMC) meeting revealed that most officials were hesitant to ease monetary policy, citing inflation risks driven by higher import costs, especially in the context of unresolved trade disputes.
- This makes the outcome of ongoing US-EU and US-China trade negotiations particularly important. A failure to reach new agreements could reintroduce tariff-related price pressure and complicate the Fed’s policy path. In such a scenario, investors could return to Gold as a hedge against renewed market volatility and inflation.
Gold technical analysis: XAU/USD slips to triangle support, below $3,350
Gold is edging lower after failing to hold above the 23.6% Fibonacci retracement of the April low-high move at $3,371. With the price currently clinging to the 50-day Simple Moving Average (SMA) at $3,341, XAU/USD is edging toward the lower bound of the ascending triangle, which was temporarily broken earlier this week.
The next key level of support is located at the 38.2% Fibo level around $3,292. A break below this zone could expose deeper downside toward the 50% retracement near $3,228.
Momentum has also weakened, with the Relative Strength Index (RSI) hovering just below neutral at 48, signaling growing downside risk if buyers fail to defend the current support zone.
Gold daily chart
For bulls to recover, a move above the $3,350 level and a clear break of $3,372 could open the door for a potential retest of $3,400. This significant round number serves as a firm barrier, a break of which could result in a retest of Wednesday's high at $3,439 and toward the June swing high at $3,452.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.