GOLD Analysis
Gold Retreats to $3,240 Amid Easing US-China Tensions and Cooling Inflation
Highlights
- Gold slips as US-China agree to a 90-day tariff pause, lowering safe-haven demand.
- Cooling US inflation supports gold by boosting prospects for future Fed rate cuts.
- Gold ETFs saw net inflows of 115 tons in April—strongest in over three years.
Overview:
Gold prices declined to approximately $3,240 per ounce as global market sentiment shifted following encouraging developments in US-China trade relations. The two economic superpowers reached a temporary truce by agreeing to lower tariffs for a 90-day period, offering markets some relief from the prolonged trade war. This move subdued demand for safe-haven assets like gold, which typically benefits from geopolitical and economic uncertainty.
While the truce dented bullion's appeal, gold found modest support from softer US inflation data. The annual inflation rate in the United States dropped to 2.3% in April, marking the lowest level since February 2021 and slightly below market expectations of 2.4%. This cooling inflation reinforces the belief that the Federal Reserve may have room to consider rate cuts in the future without immediate fear of overheating the economy. Lower interest rates reduce the opportunity cost of holding non-yielding assets such as gold, thus providing a cushion for prices.
Investor interest also remains robust, as confirmed by data from the World Gold Council, which reported net inflows of 115 tons into gold ETFs in April—the fifth straight monthly increase and the strongest since early 2021. Notably, China alone contributed nearly 65 tons, underscoring continued institutional demand for the metal in Asia.
Market participants are closely watching upcoming economic data, including Germany's Final CPI m/m and US Crude Oil Inventories, which may impact cross-asset market volatility and influence short-term trading direction for gold.
From a technical standpoint, support for gold lies at $3,190, while resistance stands near $3,260. On the MCX, gold is likely to find support at ₹93,000 and resistance at ₹94,200. Traders may consider selling on price rallies toward $3,240, targeting $3,210, with a stop-loss above $3,260, especially given recent volatility.