Gold price seems vulnerable; bears await Bessent’s brief on China talks at 07:00 GMT
- Gold price kicks off the new week on a weaker note in reaction to the optimism over the US-China trade deal.
- Easing US recession fears and the Fed’s hawkish pause underpin the USD, and further weigh on the commodity.
- The XAU/USD bears await details on the US-China agreement before positioning for any meaningful downside.
Gold price (XAU/USD) sticks to intraday losses through the Asian session on Monday as the latest optimism over a US-China trade deal continues to undermine demand for traditional safe-haven assets. Meanwhile, positive signals from high-stakes US-China talks ease market concerns about a recession in the US. This, along with the Federal Reserve’s (Fed) hawkish pause, assists the US Dollar (USD) to stand firm near a multi-week top and exerts pressure on the commodity.
Traders, however, now seem reluctant to place aggressive bets and opt to wait for the US-China joint statement at 07:00 GMT for more details about the agreement. This could help limit further losses for the Gold price, though the fundamental backdrop supports prospects for a further depreciating move. Hence, any attempted recovery could be seen as a selling opportunity and runs the risk of fizzling out rather quickly in the absence of any relevant macro releases from the US.
Daily Digest Market Movers: Gold price bears have the upper hand as investors keenly await US-China statement on trade talks
- The US and China ended high-stakes trade talks in Switzerland on a positive note on Sunday. In fact, US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer said that a trade deal had been struck with China.
- Adding to this, China’s Vice Premier He Lifeng said that the meeting achieved substantial progress, and reached consensus on key issues, triggering a fresh wave of global risk-on trade and undermining the safe-haven Gold price.
- The US Dollar holds steady near a one-month high amid the Federal Reserve’s hawkish signal that it is not leaning towards cutting interest rates anytime soon, as traders await more details on the US-China trade agreement.
- China’s Vice Premier He Lifeng said that a joint statement would be released in Geneva on Monday, and that it is going to be big news and good news for the world, which further adds to the latest market optimism.
- Russian President Vladimir Putin has agreed to hold direct talks with his Ukrainian counterpart Volodymyr Zelenskyy and stated that these talks should begin “without preconditions and delay” on Thursday, May 15.
- Meanwhile, Hamas said that the last living American hostage in Gaza, Edan Alexander, will be released and confirmed plans to hold direct talks with the US as part of efforts to reach a ceasefire and resume the delivery of aid.
- Traders this week will confront the release of US inflation figures. Apart from this, Fed Chair Jerome Powell’s appearance on Thursday will be looked upon for cues about the future rate-cut path and a fresh impetus.
Gold price bearish technical setup supports prospects for a move towards retesting the monthly low, around the $3,200 mark
From a technical perspective, any intraday breakdown and acceptance below the $3,295-3,290 confluence – comprising the 100-period Exponential Moving Average (EMA) on the 4-hour chart and the 61.8% Fibonacci retracement level of the recent move up from the monthly low – could be seen as a key trigger for bearish traders. Moreover, oscillators on hourly charts have been gaining negative traction and support prospects for a further intraday depreciating move for the Gold price. Some follow-through selling below the Asian session low, around the $3,253-3,252 region, will reaffirm the bearish bias and expose the monthly low, around the $3,200 mark. The latter should act as a pivotal point, which, if broken decisively, should pave the way for the resumption of the prior retracement slide from the $3,500 psychological mark, or the all-time peak touched in April.
On the flip side, any recovery back above the $3,300 round figure now seems to attract fresh sellers near the $3,317-3,318 zone, or the Asian session peak. A sustained strength, however, might trigger a short-covering move and lift the Gold price to the $3,345-3,347 hurdle, representing the 38.2% Fibo. level. This is followed by the $3,360-3,365 static hurdle, which, if cleared decisively, would negate the near-term negative bias and set the stage for a move towards reclaiming the $3,400 mark.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.