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Gold struggles below $3,300 amid hopes for a potential US-China trade deal, modest USD uptick

  • Gold price meets with a fresh supply on Monday amid the US-China trade deal optimism.
  • A fall in China’s gold consumption and a modest USD uptick also weigh on the commodity.
  • Trade-related uncertainties and Fed rate cut bets warrant caution for the XAU/USD bears.

Gold price (XAU/USD) maintains its offered tone through the early European session on Monday and remains within striking distance of the $3,265-3,260 pivotal support. Investors remain hopeful over the potential de-escalation of tensions between the US and China, which, along with a modest US Dollar (USD) uptick, weigh on the commodity for the second straight day. Apart from this, a fall in China’s gold consumption in the first quarter of 2025 turns out to be another factor weighing on the precious metal.

Meanwhile, prospects for more aggressive policy easing by the Federal Reserve (Fed) might cap the ongoing USD recovery from a multi-year low and act as a tailwind for the non-yielding Gold price. Furthermore, US President Donald Trump’s rapidly shifting stance on trade policies, along with persistent geopolitical risks, should contribute to limiting losses for the safe-haven XAU/USD. This, in turn, warrants some caution before positioning for an extension of the recent pullback from the all-time top.

Daily Digest Market Movers: Gold price is weighed down by signs of easing US-China trade tensions

  • China has exempted some U.S. imports from its 125% tariffs imposed earlier this month in response to the 145% US tariffs on Chinese imports. This comes on top of US President Donald Trump’s reassertion that trade talks were underway with China and fuels hopes for a quick de-escalation of trade war between the world’s two largest economies.
  • China has yet to confirm any exemptions and denies ongoing tariff talks. Meanwhile, Trump’s shifting announcements and global recession fears sustain demand for the safe-haven Gold price.
  • The China Gold Association said on Monday that the country’s gold consumption fell 5.96% year-on-year to 290.492 tonnes in the first quarter of 2025. Moreover, high prices continued to curb demand for gold jewelry, which slumped 26.85% year-on-year to 134.531 tonnes. Meanwhile, consumption of gold bars and coins surged 29.81% to 138.018 tonnes.
  • The US Dollar preserves last week’s recovery gains, though it lacks follow-through amid bets that the Federal Reserve will resume its rate-cutting cycle in June and lower borrowing costs by one full percentage point in 2025. Moreover, geopolitical risk remains in play amid the protracted Russia-Ukraine war, which limits losses for the precious metal.
  • North Korea has confirmed for the first time that it has sent troops to fight in the Russia-Ukraine conflict. Trump urged Russia on Sunday to stop its attacks in Ukraine while US Secretary of State Marco Rubio said that the US might walk away from peace efforts if it does not see progress. This, in turn, warrants some caution for the XAU/USD bears.
  • Investors this week will confront the release of key US macro data, including the JOLTS job openings report on Tuesday, US Personal Consumption Expenditures on Wednesday, and the non-farm payrolls (NFP) report on Friday. The data may provide more insight into the Fed’s policy outlook and provide some meaningful impetus to the commodity.

Gold price could extend the corrective decline once the $3,265-3,260 pivotal support is broken

From a technical perspective, bearish traders need to wait for acceptance below the 38.2% Fibonacci retracement level of the latest leg up from the vicinity of mid-$2,900s, or the monthly swing low before placing fresh bets. Some follow-through selling below the $3,265-3,260 immediate support will confirm a breakdown and make the Gold price vulnerable to extend its recent corrective decline from the $3,500 psychological mark, or the all-time peak. The subsequent downfall could drag the precious metal to the 50% retracement level, around the $3,225 region, en route to the $3,200 mark. A convincing break below the latter will suggest that the commodity has topped out in the near term.

On the flip side, attempted recovery back above the $3,300 mark might confront some resistance near the Asian session high, around the $3,331-3,332 region. Any further move up might still be seen as a selling opportunity and remain capped near the $3,366-3,368 supply zone. The latter should act as a key pivotal point, which if cleared decisively should allow the Gold price to reclaim the $3,400 mark. The momentum could extend further toward the $3,425-3,427 intermediate hurdle before bulls make a fresh attempt to conquer the $3,500 psychological mark.

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.