GOLD Analysis
Afternoon: Gold Eyeing Further Pullback as Trade Optimism and Dollar Strength Challenge Safe-Haven Flows
Highlights:
- Gold’s third daily decline to $3,232 reflects fading safe-haven flows as U.S.–China trade optimism and dollar buying intensify.
- U.S. Q1 GDP contraction and easing core PCE inflation reinforce aggressive Fed rate-cut expectations, yet technicals favor deeper pullback below $3,229/$3,228.
- Critical Fibonacci levels—38.2% at $3,260, 50% at $3,229, and 61.8% at $3,160—will guide traders on whether gold will resume its longer-term uptrend or extend the correction.
Overview:
Gold (XAU/USD) extended its retreat for a third consecutive session, trading near $3,232 after dipping to a two-week low earlier in the European morning. The metal’s bearish bias reflects improving global risk appetite—buoyed by signs of de-escalation in U.S.–China trade tensions—and renewed U.S. dollar demand, which has diverted flows away from non-yielding assets. President Trump’s recent assertion of “very good probability” for a China deal, coupled with optimism over potential pacts with India, South Korea, and Japan, has undercut bullion’s safe-haven premium.
Compounding near-term headwinds, U.S. macroeconomic data surprised to the downside. The Bureau of Economic Analysis reported a 0.3% annualized GDP contraction in Q1, rekindling recession fears, while the Personal Consumption Expenditures price index— the Fed’s preferred inflation gauge—eased to 2.3% year-on-year in March (core PCE at 2.6%). ADP payroll figures also lagged expectations, signaling softer job gains. These developments have heightened market expectations for an aggressive Fed easing cycle, with traders pricing in approximately 100 basis points of cuts by year-end. Although this dynamic should eventually cap the U.S. dollar and support gold, the immediate technical backdrop favors further correction.
Key technical thresholds underscore this cautious stance. The breakdown through the $3,265–$3,260 pivot (38.2% Fibonacci of the recent rally) triggered fresh selling, but bearish confirmation awaits acceptance below the 50% retracement at roughly $3,229–$3,228. A clear breach here could accelerate a slide toward the $3,200 round-figure and the 61.8% Fibonacci near $3,160. Conversely, any rebound will likely confront initial resistance around $3,260–$3,265, followed by the 38.2% Fibonacci at $3,300; a decisive recovery above $3,368 (23.6% Fibo) could prompt short-covering and retarget the $3,350–$3,350 supply zone, potentially paving the way back toward $3,400 and higher.
Geopolitical tensions remain an undercurrent. Kremlin warnings of large-scale mobilization and continued Russian drone attacks in Ukraine may intermittently bolster gold, while the market’s attention now turns to U.S. ISM Manufacturing PMI and Friday’s Nonfarm Payrolls for fresh directional cues
Trading Strategy
- Action: Selling on break below 3220$, targeting $3200-3160$; place a stop-loss above $3240 to protect against a renewed breakout.