Gold prices dropped more than 1.5% on Friday and are set to close the week with losses exceeding 4%, reflecting a shift in investor sentiment toward riskier assets following the easing of US-China trade tensions.
US-China Tariff Truce Spurs Sell-Off
The precious metal started the week under pressure as news broke of a significant de-escalation in the US-China trade war, including an agreement to reduce tariffs by 115%. This development encouraged capital flows away from gold and into equities and other risk assets.
Mixed US Economic Data Influences Market
US data released during the week showed slowing Retail Sales and mixed housing figures. The University of Michigan’s Consumer Sentiment Index fell to its lowest level since July 2022 at 50.8, with inflation expectations rising to 7.3% for the next year.
Meanwhile, US Import Prices rose by 0.1% in April, and housing starts increased by 1.6% month-on-month, while building permits declined sharply by 4.7%. These mixed signals have added complexity to the market outlook.
Federal Reserve Remains Cautious
Despite signs of disinflation, Fed officials have adopted a cautious stance regarding interest rate cuts, due to uncertainties in trade policies and inflationary pressures. Treasury yields rebounded this week, bolstering the US Dollar and putting further pressure on gold.
Technical Outlook: Double Top Pattern Remains Valid
Gold’s recent price action saw a bounce above $3,200, but sellers quickly pushed prices below this key resistance, confirming the “double top” pattern. Momentum indicators like the Relative Strength Index (RSI) remain bearish, suggesting further downside risk.
If gold holds below $3,200, support is expected near the 50-day Simple Moving Average at $3,155, followed by $3,100. A sustained break above $3,200 could open the path toward resistance levels at $3,257 and $3,300.
Why Invest in Gold?
Gold has historically served as a store of value and a hedge against inflation and currency depreciation. Its status as a safe-haven asset makes it attractive during times of economic uncertainty and market turbulence.
Further Reading & Resources
- Historical Gold Price Data – Investing.com
- US 10-Year Treasury Inflation Expectations – Federal Reserve Economic Data (FRED)
- Understanding Inflation and CPI – US Inflation Calculator
- University of Michigan Consumer Sentiment Index – U.S. Bureau of Labor Statistics
