Gold prices are seeing a small bounce after a late-session retreat from a multi-week best seen on Thursday. As the European session opened on Friday, the price of gold was still able to maintain a tenuous upside trajectory. It even exchanged hands above the $3,350 mark. This shift is happening in parallel with a cautious new wave of optimism over US-China trade negotiations. This has had the effect of reducing the ebullience of bullish gold investors.
It’s been an especially tough time for gold bulls. Potential price gains are further curbed by a mild recovery in the US dollar. Market participants have been waiting to see what the United States Non-Farm Payroll (NFP) report will bring. This report will no doubt be instrumental in determining the direction of our future market.
Gold Price Dynamics Amid Trade Talks
Gold’s recent price volatility is indicative of the tension between market sentiment and macroeconomic conditions. The euphoria was short-lived, undermined in part by hope from progress in the US-China trade negotiations. Yet this optimism has prevented super-aggressive betting on gold from getting out of control. Investors are jumpy with looming threats of increased protectionism that would shake up the current calm, stable, market environment.
US President Donald Trump’s erratic approach to trade policy has played no small part in creating this gun-shy mood. No one understands better than investors how sudden surprises can dramatically shift the dynamics of a market. This heightened uncertainty is preventing gold from shooting much higher. As long as the metal continues to trade positively, one cannot deny that outside influences, particularly ongoing trade negotiations, loom large over market action.
The short-term upside resistance for gold is at the top line of a several-day-old trading range. It’s the high end – just above $3,400. A breach of this barrier could signal stronger bullish momentum, while failing to break through may lead to a consolidation phase.
The Role of the US Dollar and Economic Data
Our analysis found that the recent increase in the value of the US dollar has been a key driver of falling gold prices. Traders are looking ahead to the US NFP report, which is anticipated to show the creation of 130,000 new jobs in May. In the meantime, a stronger dollar will be a key factor in determining gold’s direction. Analysts expect the unemployment rate to remain unchanged at 4.2%. The week’s big employment readings point to a cooling labor market.
This cooling trend could provide the Federal Reserve with ample justification to cut interest rates further by the end of 2025. Traders are pricing in at least two of those rate cuts by 25 basis points each within that timeframe. Market expectations are pricing in this likely change. Such steps might help prevent any major dollar appreciation, providing some support to gold prices.
Gold also has a very close immediate downside protection level already set at the $3,334-3,333 region. This lower bound of the range is very important for achieving price stability. A breach beneath this support level may well foreshadow a shift in bearish sentiment and pull Bitcoin costs down the $3,286-3,285 area.
Future Projections for Gold Prices
Looking ahead, analysts suggest that gold prices could experience upward momentum if they manage to break through established resistance levels. If gold manages to get above the $3,400 level, it will then aim for the $3,433-3,435 resistance area. From there, it will aim to complete a rise to $3,500, the all-time high reached in April.
The daily chart’s oscillators hanging in positive territory should provide further encouragement to gold bulls. While optimism is warranted, caution is still key as market forces are shifting with new economic data still pouring in. If liquidation persists and drives prices under the key $3,326-3,324 horizontal support, that would dramatically alter gold’s near-term outlook. Traders will want to be on the lookout for this important level.