Gold prices fell just under -0.50% in Monday’s Asian trading session. This decline was due primarily to US President Donald Trump’s announcement that he would postpone the imposition of tariffs on the European Union (EU). This move led to new cautious optimism in the market. Consequently, bulls are behaving more cautiously while treading through this economic shift.
When the week started, gold prices were hovering around the $3,430 level. Analysts predict gold will reach record highs if it breaks above this threshold. It could even threaten its all-time high of just under $3,500 established last April. Although prices may have peaked with a small week-to-week dip, a major crash in price appears improbable. Lingering worries over the sinking fiscal condition of the United States continue to hold prices down.
And other countries like China, India and Turkey are increasing their gold reserves. This dramatic increase is indicative of a larger current in global finance. According to the World Gold Council, central banks purchased a record-setting 1,136 tonnes of gold last year. That purchase, which amounts to about $70 billion, marks the largest annual sum since we started keeping records.
Market Reactions to Trade Developments
Gold’s modest retreat this week is largely due to changing expectations after President Trump announced a delay on tariffs. Market players pull back when trade policies become uncertain. This dynamic is especially the case for safe-haven assets, such as gold.
The bright outlook expected from forthcoming trade negotiations has surely been a factor in gold investors taking a more subdued approach. As traders reassess their positions in light of potential economic improvements, they are weighing the implications for inflation and interest rates. The US Consumer Price Index (CPI) and Producer Price Index (PPI) surprised on the downside earlier this month. This data is building up hopes that the Federal Reserve will start cutting interest rates later this year.
As a result, traders have begun to price in at least two 25 basis point Fed easing moves. This decision now sets a complicated stage for where gold prices might be headed. That’s because low interest rates reduce the opportunity cost of holding non-yielding assets, like gold. As such, these assets become more attractive to investors.
Technical Analysis of Gold Prices
Technically speaking, gold prices have remained on a climb towards a longer-term bullish path, or ascending trendline. Positive oscillators on the hourly and daily charts. That bodes well for a bullish outlook for gold in the near future. There is still one very important threshold — the $3,430 threshold. Should prices be able to do so convincingly, they’ll likely be headed to retest the all-time high set back…before the stars aligned.
If gold starts to break down through important support zones, especially at $3,325-3,324, we might see a wave of technical selling begin. Fibonacci levels Analysts have highlighted $3,300 and $3,283 as the next support levels in case of a more significant corrective move. A sustained break below these levels would be the first sign that overall market sentiment is changing and that more downside could be coming.
Momentum through Friday’s swing high around $3,366 could serve as rocket fuel for bullish traders. A sudden spike in prices would no doubt return them to the $3,400 estimate. This would help restore upward momentum and bring more first-time buyers into the market.
Geopolitical Factors and Central Bank Activity
Geopolitical risks continue to be a strong driver of influence on gold prices. This is particularly the case given current global crises including the Russia-Ukraine war and escalating tensions in the Middle East. These elements have historically pushed investors into gold as a safe-haven asset in times of crisis and uncertainty. As a result, losses for gold are likely to be deeper due to these long-lasting threats.
Beyond these geopolitical risks, another bullish factor for prices is central banks’ increasing hunger for gold. Emerging market central banks have tripled their gold reserves in the past two decades. This smart, strategic move further insulates their city from an economy rapidly accelerating toward instability. This report by the World Gold Council features the unprecedented purchases from 2022. This sharply accelerating trend is unmistakably indicative of a world awash in economic uncertainty increasingly compelling nations to bolster their financial defenses with gold.
Moreover, as these central banks are still growing their reserves, their demand can easily flip the market’s supply and demand balance on its head. This increased demand might go some way to propping up gold prices. It should, but that’s true even when sentiment is subject to abrupt shifts from geopolitical conflict or the trade policy pendulum.