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Gold tumbles with stronger Dollar and trade talks in play

  • Gold price deepens losses and drops below the $3,300 region on Tuesday, seeking support near a key level. 
  • Market sentiment is improving this week amid trade talks optimism, dampening safe-haven demand. 
  • A stronger US Dollar is acting as headwind after Japan considers reducing its debt issuances. 

Gold (XAU/USD) price sees losses grow on Tuesday, sliding below the $3,300 mark at the time of writing on Tuesday as improving risk-on mood and a stronger US Dollar (USD) are creating some issues for the Gold rally.  Gold extends its decline for a second day this week as the US dollar caught up with some gains and demand for haven assets cooled, with investors also weighing prospects for improving trade relations between the US and the EU after US President Donald Trump said on Sunday that he agreed to an extension on the 50% tariff deadline on the European Union (EU) until July 9.

The stronger USD gained momentum at the end of Asian trading after the Japanese Ministry of Finance (MoF) stated that its bond issuance plan might see some tweaking, with lower volumes. This made Japanese yields collapse and saw the Japanese Yen (JPY) devalue against the US Dollar, triggering a spillover effect in favor of the Greenback against several other major currencies. A stronger US Dollar makes Gold more expensive for most buyers, and thus it is seen as a headwind.

Daily digest market movers: Looking for more wins

  • Demand for safer assets like Gold has been impacted as signs emerge that the White House may be making progress in negotiations with some trading partners. Gold-backed Exchange Traded Funds (ETFs) registered five straight weeks of outflows since peaking at the highest in more than a year in mid-April, Bloomberg reports. 
  • One of China’s biggest Gold miners is planning its second US Dollar bond offering in two weeks, the latest in a slew of global companies looking to tap growing investor interest in the precious metal. Shandong Gold Group is considering issuing a roughly $100 million perpetual bond as soon as this week. The potential sale comes after it already raised $300 million via a three-year bond offering earlier this month, Bloomberg reports. 
  • Harmony Gold Mining Co. has agreed to buy MAC Copper Ltd., enabling the top producer of South African Gold to gain a further foothold in Australia and increased exposure to Copper. Harmony is offering $12.25 for each MAC share, implying a total equity value for the Australian company of about $1.03 billion, Reuters reports. 
  • There are still tailwinds at play, with markets remaining in wait-and-see mode, weighing several risks, including the swelling US deficit, ongoing trade talks, and worsening conflicts in the Middle East and Ukraine.

Gold Price Technical Analysis: Support not there yet

Some downside pressure appears on Gold’s price this week. The headwinds mentioned above could be proven quite persistent, as the US Dollar has already experienced a long stretch of devaluation and is due for some recovery at the expense of the precious metal. Add some more possible positive signs on trade talks, and any prospects of Gold extending its highs might fall short of expectations. 

On the upside, the daily Pivot Point at $3,341 is the first level to look out for, followed by the R1 resistance at $3,359. Further up, the R2 resistance at $3,374 follows not far behind and could open the door for a return to the $3,400 round level and potentially further course to $3,440, coinciding with May 6 and May 7 peaks. 

On the other side, some thick-layered support emerges in case the Gold price declines. In case the $3,300 mark breaks, some intermediary support could come from the S2 support at $3,275. Further below, there is a technical pivotal level at $3,245 (April 11 high). 

XAU/USD: Daily Chart

US-China Trade War FAQs

Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.

An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.

The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.