The gold price (XAU/USD) continues its decline, reflecting a sustained bearish bias in the market amid a confluence of macroeconomic and geopolitical developments. The metal is currently trading near the $3,135 level, marking its lowest point since April 10, as investors move away from safe-haven assets in favor of riskier instruments.
This sentiment shift is being driven by renewed US-China trade optimism and a recalibration of market expectations regarding future Federal Reserve (Fed) interest rate cuts. The brokers at NordaLueur provide a thorough analysis of this topic in their article.
Trade Optimism Erodes Safe-Haven Demand
One of the primary drivers behind gold‘s continued weakness is the easing of trade tensions between the United States and China. Both economic superpowers have agreed to pause tariff escalations for 90 days, a move that reduces near-term risks of a recession in the world’s largest economy. Further, the US President indicated openness to direct negotiations with the Chinese President, which further fueled risk-on sentiment across financial markets.
This shift in sentiment has prompted investors to rotate out of traditional safe-haven assets like gold and into equities and other higher-yielding instruments, thereby undercutting demand for the non-yielding precious metal. As a result, the yellow metal is struggling to find a floor, despite simmering geopolitical tensions in other parts of the world.
Diminished Rate Cut Bets Boost US Yields
Adding to gold‘s woes is the market’s reassessment of the Fed’s monetary policy trajectory. Just a month ago, traders were pricing in more than 100 basis points (bps) worth of rate cuts by the Fed for 2025. However, following stronger-than-expected economic data and Fed officials’ recent commentary, that expectation has shrunk to just over 50 bps.
This dramatic revision has translated into a sharp rise in US Treasury yields, with the 10-year benchmark yield climbing to its highest level in a month. Rising yields increase the opportunity cost of holding gold, which does not offer interest, thereby intensifying the selling pressure.
Fed officials have reinforced this narrative with cautious remarks. Vice Chair Philip Jefferson noted that tariffs and trade policy uncertainty could jeopardize progress on inflation, but also acknowledged that recent inflation readings are moving closer to the 2% target. Chicago Fed President Austan Goolsbee and San Francisco Fed President Mary Daly echoed similar sentiments, emphasizing the need for patience and a data-dependent approach moving forward.
Market Awaits Fresh Impetus from Powell and PPI
Despite favorable conditions for the US Dollar (USD) and rising yields, USD bulls remain cautious ahead of two key events: the release of the US Producer Price Index (PPI) and a speech by Fed Chair Jerome Powell. Both are expected to provide clarity on the Fed’s next move, which will be instrumental in shaping near-term direction for both the USD and gold price.
A hawkish tilt in Powell’s commentary or a hotter-than-expected PPI print could reinforce market expectations for fewer rate cuts, thus extending the bearish trajectory for gold. Conversely, any dovish surprise may provide a reprieve for XAU/USD.
Technical Outlook: Breakdown Signals Further Weakness
From a technical perspective, gold’s drop below the $3,200 psychological mark and the 61.8% Fibonacci retracement level from April’s rally has added further weight to the bearish thesis. The breakdown has now opened the door to a deeper retracement, with immediate support seen in the $3,135–$3,133 zone.
Should this level fail to hold, downside momentum could accelerate toward the $3,100 handle, and potentially the $3,060 area, which represents the next major support zone.
On the upside, any attempted recovery is likely to meet resistance around $3,168–$3,170 (the former 61.8% Fibo. level), followed by a tougher barrier at $3,200. A sustained move above this level would challenge $3,230 (50% Fibo.) and could trigger a short-covering rally toward $3,265 and the $3,300 round figure, aligned with the 38.2% retracement.
Conclusion: Bearish Bias Likely to Persist
With trade optimism, rising US bond yields, and reduced Fed rate cut expectations converging, the gold market remains under strong selling pressure. Even geopolitical tensions and a fragile equity market tone have failed to shift sentiment back in favor of bullion. Unless the PPI data or Fed commentary significantly alters the current narrative, the path of least resistance for XAU/USD appears to be lower in the near term.
Key Levels to Watch:
- Support: $3,135, $3,100, $3,060
- Resistance: $3,170, $3,200, $3,230, $3,265, $3,300
The fundamental and technical landscape suggests that gold may continue to struggle unless macroeconomic conditions shift meaningfully in its favor. Until then, the bearish bias remains firmly in place.
