Gold prices moved dramatically back and forth in recent trading days as they indeed fell off a cliff, breaking well under the key $3,300 level. Analysts are looking very closely at what the metal is doing. It recently managed to break above the key 21-day Simple Moving Average (SMA) at $3,306, a crucial technical indicator that could determine its short-term direction. Against a backdrop of heightened geopolitical tensions, a Korean Peninsula likely to dominate US-China trade talks, market players are preparing for further volatility.
By early Friday, gold prices hovered around weekly lows just under $3,300, raising hopes that a significant correction could be in the future. If gold wants to keep any sort of bullish momentum, it must get a daily close above the 21-day SMA at $3,306. If you don’t, it could be a sign that you’re turning bearish. In doing so, it may help kick off a fresh downtrend that aims for the 50-day SMA at $3,129.
Current Market Dynamics
We have just witnessed quite a bearish rejection in the gold market over the $3,400 wall. This key threshold has been tough for purchasers to hold. Analysts believe gold prices have to take back the $3,400 psychological level in order to bring back the bullish mojo. They call for a solid closing argument above the 12-day high of $3,440. Further topside, the next key target is the former record high of $3,500 that many traders have been looking at with admiration as possible resistance.
Moreover, the 14-day Relative Strength Index (RSI) has started to stabilize, evincing a correction in yellow metal prices. “The RSI has stalled its descent while defending the midline, suggesting that a rebound in Gold price could be in the offing,” noted an industry analyst. With some signals of trader optimism emerging as indicated in this predictor, traders looking to profit from market reversal can find some good news here.
Geopolitical headwinds and outside economic forces may make things more interesting for gold in the months ahead. According to reports, this marks the 6th month in a row that China has added to its gold reserves. This trend serves to highly enrich those buyers of gold. This accumulation, too, is the result of greater forces at work—including global economic conditions and investor sentiment.
Impacts of US-China Trade Relations
On the short-term, the approaching US-China trade discussions will likely have a major effect on gold prices. As the specter of Donald Trump’s possible return to the White House looms, tensions have reached a boiling point. Market watchers fear this will result in increased instability. As with the November discussions, these could threaten support levels at $3,260 and the May 2 low of $3,223.
Profit-taking is likely to be a strong theme as investors continue to adjust their portfolios in an environment of heightened uncertainties over trade relations. Trade-related risks are the culprit, analysts caution, and changes in these can make both long USD and long gold positions very volatile. In April, US tariffs had caused China’s trade balance to suffer. Such optimism has led to recent speculation that gold would be one of the greatest beneficiaries from this development, serving its safe-haven role.
“Furthermore, Israel’s escalation with Iran-backed Houthis in Yemen and fears of a broader military conflict along the India-Pakistan border keep geopolitical risks in play,” – Haresh
Geopolitical Tensions and Market Sentiment
Beyond trade issues, geopolitical risk still remains an important factor in driving market sentiment. Recent flareups, including the new daily clashes between Russia and Ukraine, have further complicated a truly high-stakes place. As reported by FXStreet’s analyst Haresh Menghani, “Russia and Ukraine both reported attacks on their forces on the first day of a three-day unilateral ceasefire called by Russian President Vladimir Putin.”
Geopolitical uncertainties usually lead investors to go for safe-haven assets such as gold. This trend has made market dynamics much more challenging as traders seek to mitigate any possible risk. That combination of global stresses and domestic economic crux is all but certain to determine gold’s performance in the trading sessions ahead.