GOLD Analysis
Afternoon: Gold Pulls Back from Record High as Trade and Fed Uncertainties Ease
Highlights:
- Gold retreats from a $3,500 peak to below $3,370 as Bessent flags near-term de-escalation of US-China tariffs.
- Trump’s backing off Powell-firing threats restores Fed credibility, reducing gold’s yield-hedge appeal.
Overview:
Gold, having surged roughly 30% year-to-date, briefly touched an all-time high near $3,500 per ounce before reversing sharply and slipping below $3,370. This reversal stems from a sudden thaw in U.S.-China trade tensions and renewed confidence in the Federal Reserve’s independence—factors that have temporarily dampened gold’s safe-haven appeal.
Trade-War Developments
- On Tuesday, Treasury Secretary Scott Bessent remarked that the ongoing tariff standoff with China is “unsustainable” and expected to de-escalate soon.
- These comments followed the administration’s previous escalation of tariffs on semiconductors and pharmaceuticals, which had been a major catalyst for gold’s earlier rally.
- Growing optimism around a rollback or freeze in bilateral duties has reduced the urgency for investors to hedge via bullion.
Federal Reserve Independence
- President Trump recently stepped back from threats to dismiss Fed Chair Jerome Powell, acknowledging the central bank’s autonomy.
- Powell’s refusal to cut interest rates amid inflation concerns had previously fueled gold demand by lowering real yields.
- With Fed independence now less in question, the metal’s yield-hedge dynamic has weakened, contributing to the pullback.
Technical Analysis
- Support & Resistance (Spot Gold): Key support at $3,310; resistance at $3,370.
- MCX Gold (Indian Market): Support near ₹96,600; resistance at ₹98,000.
- The spot price’s failure to hold above $3,370 signals potential for further downside toward the $3,310 level.
- Volume and momentum indicators confirm a loss of short-term bullish conviction, suggesting that traders should favor tactical short positions.
Economic Calendar & Catalysts
Investors await a slate of high-impact releases that could re-ignite volatility in precious metals:
- Euro Zone: German Flash Manufacturing PMI, German Flash Services PMI.
- United States: Flash Manufacturing PMI, Flash Services PMI, Crude Oil Inventories, and remarks from FOMC member Austan Goolsbee.
Trading Strategy
- Action: Sell on rallies around $3,355, targeting $3,285; place a stop-loss above $3,370 to protect against a renewed breakout.
- Rationale: Easing trade tensions and restored Fed credibility are likely to keep a lid on bullion, offering opportunities to short on strength.
- Risk Management: Strict adherence to the $3,370 stop-loss is critical, as any sustained move above that level may signal a return of safe-haven flows.