Gold Price Slides as US-China Trade Optimism Undermines Safe-Haven Demand | Errante

Market Overview

Gold has been retreating for the second consecutive day, extending losses from an all-time high of $3,500. Receding safe-haven demand amid improved risk tone weighs on the gold. The sentiment around US-China and shift in political tone from Trump administration have initiated profit taking, denting the precious metal.

Fundamental Analysis

Gold’s bullishness pauses as investor confidence returns to the risk assets. After briefly kissing the $3,500 mark, the metal dropped below $3,300 during early European session on Wednesday. The move stems from de-escalation of trade war between US and China.

The US President’s administration signaled softness on trade negotiations as Treasury Secretary Bessent suggested the tension with China may ease soon. White House spokeswoman Karoline Leavitt echoed the same, stating the stage is set for trade negotiations. Hence, financial markets have been spurred, raising equities and prompting profit taking in gold.

Moreover, the President Trump has also distanced himself from threats of firing Fed Chair Powell, reducing pressure on the central bank to cut rates sooner. This has helped improve investor confidence and shift capital away from safe havens like gold.

On geopolitics, the comments from Russian and Ukrainian leaders have hinted openness in peace negotiations. Hence, the selling pressure mounts further on the gold.
However, underlying support for gold remains intact. Despite dollar’s recovery and equity rally yesterday, the greenback remains fragile amid Fed’s potential rate cuts. Market participants now price in three rate cuts this year. As a result, non-yielding assets like gold can benefit.

Looking forward, US PMI data could offer impetus to the market. Moreover, headlines related to trade negotiations can further inject volatility to the market and reignite the interest in gold.

Technical Analysis

Since the start of the day, gold has exhibited classic market behavior, transitioning through an accumulation phase, followed by a manipulation phase, and subsequently entering the distribution phase, as previously explained in the webinars. The open price of the day now acts as a significant level of support and resistance, serving as a key pivot point for the market. For a bullish scenario to unfold, the price needs to break decisively above this level, demonstrating strong momentum and volume to support the upward movement. Conversely, if the current distribution phase continues and a strong bearish pattern develops, the price is likely to move firmly downward, confirming the prior trend. Traders should monitor price action around the open price level closely, as it holds critical importance for determining the next market direction.

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