Gold price (XAU/USD) have been on a steady decline during the European session on Thursday. This marks a pause in the five-day winning streak that recently pushed gold to an all-time high. A combination of a modest US Dollar (USD) rebound and a positive risk tone has led traders to take profits amid overbought conditions. However, the broader market backdrop suggests caution before confirming a peak in gold prices.
Factors Influencing Gold Price Movement
The recent retreat in gold prices can be attributed to a stronger USD and improved market sentiment. Despite this, concerns about the US-China trade war and potential economic fallout from protectionist policies continue to support gold as a safe-haven asset. Additionally, expectations of the Federal Reserve maintaining its easing bias and falling US Treasury yields are limiting the downside for gold.
Impact of US-China Trade War on Gold
US President Donald Trump’s new 10% tariffs on Chinese imports and China’s retaliatory measures have heightened trade tensions. These developments fueled a surge in gold prices to a record high earlier this week. Investors remain wary of the economic implications, which could further bolster gold’s appeal as a safe-haven asset.
Economic Data and Gold Price Trends
Recent economic data has been mixed. The ADP report showed private-sector employment growth, while the US ISM Services PMI disappointed. Falling US Treasury yields and expectations of Fed rate cuts have also weighed on the USD, providing support for gold. Investors are now awaiting the US Nonfarm Payrolls report for further direction.
Technical Analysis of Gold Prices
From a technical standpoint, the Relative Strength Index (RSI) indicates overbought conditions, suggesting the need for caution. However, the recent breakout above key resistance levels points to a bullish trend. Any corrective pullback is likely to find support near the $2,855-2,850 zone, with further downside potential limited.
What’s Next for Gold Prices?
While short-term profit-taking has led to a decline in gold prices, the overall outlook remains positive. Factors such as trade tensions, Fed policy, and economic data will continue to influence gold’s trajectory. Traders should monitor key support and resistance levels for potential trading opportunities.
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