Price of gold has recently seen significant increases, having just broken the $3,300 per troy ounce threshold. This latest upward move comes on the heels of an upward trendline being formed on May 15. Analysts view continued doubt over what exactly U.S. President Donald Trump wants from the international stage as another major contributor. This combination is likely raising gold prices. Negotiations between the U.S. and China continue. These negotiations may result in a breakthrough that greatly affects the metal’s price in the next weeks.
The price movement of gold has been particularly sensitive to global economic conditions. Investors are looking for hints in the results of ongoing trade negotiations between the two countries’ economic heavyweights. If negotiators come back with a positive agreement on tariffs, it would allay concerns about the state of the global economy. This unexpected positive outcome should result in a significant decrease in gold prices.
Current Gold Price Dynamics
As we go to press, gold is trading well north of $3,300, a bullish resurgence indeed. The price must continue to hold above well known support and resistance levels to keep a bullish structure intact. In order to keep a sideways bias for gold, it needs to continue to operate within certain parameters. Support level is at $3,240 (S1), resistance line is at $3,385 (R1).
The futures contract’s resistance levels for gold are set at $3,385 (R1), $3,500 (R2), and $3,645 (R3). In comparison, the support levels are $3,240 (S1), $3,115 (S2) and $2,980 (S3). If gold can break decisively above that $3,385 resistance line, it will be a strong bullish signal. Buyers can then turn their attention to the next level of resistance, a lump at $3,500. If it breaks out underneath the $3,240 support level (S1), this would indicate that a bearish trend is in place. Sellers are probably going to target the next support level at $3,115 (S2).
Impact of Central Bank Purchases
Recent data from the World Gold Council highlights a decrease in central bank net purchases of gold, which slowed down in April for the second consecutive month. In their report, net purchases have left global central banks as net buyers of 12 tonnes in April. This is a 12% decrease from last month and below the 12-month average of 28 tonnes.
“Global central banks bought a net 12t in April based on reported data, 12% lower than the previous month and below the 12-month average of 28t.” – World Gold Council.
Even with this deceleration, experts are still bullish on demand going forward. The World Gold Council stated that they “still expect overall buying to continue, given that the economic and geopolitical outlook remains highly uncertain.” This growing sentiment is indicative of an increased confidence in gold’s traditional role as a safe-haven asset amid worsening global tensions and increasing economic upheaval.
Tariff Talks and Global Economic Influence
The revised tariff increases, which will apply to list 3 products only, will go into effect June 4. They will likely be the key drivers in determining gold’s price direction. With negotiations between U.S. and Chinese leaders ongoing, any indication of movement on either side’s position would immediately change market sentiment for the better. If these discussions lead to something constructive, then all investors will be less anxious. A more positive approach would help calm their fears about the country’s future economic stability.
Market observers are watching these changes closely. If trade tensions ease, demand for gold will likely decrease. Indeed, as investors have found their appetite for riskier assets, this may finally add downward pressure to gold’s price.