The price of Gold (XAU/USD) rebounded nearly 1% on Tuesday, climbing to around $3,260 per ounce, after suffering a sharp 2.65% drop the previous day. The move comes as initial enthusiasm over a US-China trade deal announcement rapidly faded, prompting renewed safe-haven demand from traders seeking portfolio protection. A deep dive into the subject is offered by Lesrouleaux in this article.
A Short-Lived Rally in Risk Appetite
Market sentiment initially spiked on optimism following Monday’s announcement of a provisional trade agreement between Washington and Beijing, signaling a thaw in long-standing tariff tensions. However, by Tuesday morning, traders and analysts began expressing skepticism over the lack of concrete details within the agreement.
The absence of specific terms—such as implementation timelines, enforcement mechanisms, or follow-up negotiation schedules—led many to view the agreement as cosmetic rather than substantive. This lack of clarity has left markets vulnerable to reversals, particularly in risk-sensitive assets.
As a result, Gold prices rebounded, fueled by renewed caution and a strategic move by investors to buy the dip at discounted levels.
Safe Haven Flows Resume
Gold’s traditional role as a safe-haven asset has been reasserted amid geopolitical uncertainty and macroeconomic ambiguity. With traders digesting mixed signals from central banks, commodity markets, and international trade relations, a pivot back toward precious metals appears prudent.
Chicago Federal Reserve Bank President Austan Goolsbee noted that even existing tariff levels would continue to exert an inflationary impulse, according to the New York Times. Meanwhile, Deutsche Bank analysts observed that the recent trade agreement is unlikely to trigger a swift rate cut by the Federal Reserve, reinforcing expectations that monetary policy will remain restrictive for now.
This is particularly relevant as Gold and interest rates share an inverse relationship. When interest rates decline, the opportunity cost of holding non-yielding assets like Gold falls, often leading to higher prices for the metal.
Geopolitical and Corporate Risks Add Pressure
Beyond macroeconomic signals, there are tangible risks to Gold supply chains, especially from tariff impacts. One case in point is Northern Star, a Perth-based mining firm operating the Pogo gold mine in Alaska. The company is facing rising operational costs due to import tariffs on equipment and materials, threatening to push the mine toward break-even or loss-making territory, Bloomberg reports.
Simultaneously, the US President reignited trade tensions with Europe, stating on Monday that the EU is “nastier than China” in trade relations. This renewed geopolitical antagonism adds to the market’s anxiety, prompting more traders to seek defensive assets such as Gold.
ETF Inflows Signal Renewed Demand
Gold-backed ETFs saw fresh inflows on Tuesday, marking a reversal after weeks of outflows. This suggests that institutional investors are re-entering the market, seeking safe-haven exposure amid lingering macroeconomic risks and geopolitical uncertainty. These inflows often signal broader confidence in Gold’s upside potential, especially when spot prices begin to rebound.
Technical Analysis: Gold Bulls Regain Some Ground
From a technical standpoint, Tuesday’s price movement offers key signals. The daily Pivot Point sits at $3,248, closely aligned with the April 11 high of $3,245, indicating a critical confluence zone. Should bullish momentum hold, the next upside target would be $3,289, representing the R1 resistance level.
Beyond that, $3,341 marks a stretch target for the week, aligning with Friday’s high and the R2 resistance level. However, a failure to breach these thresholds could result in renewed downside pressure.
On the support side, a double bottom appears to be forming near $3,195, which is the S1 intraday support. If bearish sentiment resumes, further levels to watch include $3,167 (April 3 high) and $3,155 (S2 support). A break below both would bring the 55-day Simple Moving Average (SMA) at $3,121 into play, suggesting a possible deeper correction.
Strategic Positioning: Buying the Dip?
In light of the uncertain outlook for trade policy and Fed rate decisions, current levels may represent a strategic entry point for longer-term investors. The fade in euphoria around the trade deal could morph into another risk-off wave, especially if diplomatic tensions resurface or US macro data disappoints.
Traders are opting for prudent exposure to safe-haven assets, and Gold’s quick recovery on Tuesday underscores its resilience in volatile conditions.
Conclusion
The initial surge in optimism over the US-China trade agreement has proven short-lived, with markets quickly reassessing the realities behind the headlines. Gold’s near 1% rebound on Tuesday reflects this shift, as investors hedge against uncertainty and reconsider the durability of any economic relief from the trade deal.
Given the ongoing inflationary pressures, lukewarm Fed policy expectations, and renewed geopolitical tensions, the bullish case for Gold remains intact, particularly if traders continue to seek safe-haven assets in an environment full of unknowns.
