Gold prices remained stable against the US Dollar on Tuesday, as markets balanced the positive developments in US–China trade talks with increasing geopolitical risks.
Discussions in London between senior US and Chinese officials showed signs of progress, boosting market sentiment and providing support for the US Dollar. However, rising tensions surrounding Iran’s nuclear program added upward pressure on gold, which held above the $3,300 mark.
Iranian lawmakers accused the US and Israel of scheming to set a “nuclear trap” ahead of planned negotiations, while former US President Donald Trump warned that further uranium enrichment by Tehran could prompt military action.
Markets are now focused on the upcoming US Consumer Price Index (CPI) data, set for release on Wednesday. The report is expected to provide crucial insights into the Federal Reserve’s next policy move. Economists forecast a rise in headline inflation to 0.3% month-over-month in May, up from 0.2% in April. Year-over-year inflation is anticipated to climb to 2.5% from 2.3%. Core CPI, which excludes food and energy, is also expected to rise by 0.3%, bringing the year-over-year rate to 2.9% from 2.8%. This data will play a critical role in shaping expectations around interest rates, directly influencing both the US Dollar and gold prices.
In the latest developments, US Treasury Secretary Scott Bessent, US Trade Representative Jamieson Greer, and Commerce Secretary Howard Lutnick continued talks with Chinese Vice Premier He Lifeng in London on Tuesday. Reports indicated that discussions are progressing well, with expectations of further engagement. On Monday, Kevin Hassett, Director of the US National Economic Council, expressed optimism about a quick and productive outcome, while President Trump commented positively on the ongoing talks.
Trade data from China revealed a 35% year-over-year drop in exports to the US in May, marking the steepest decline since February 2020. However, there is hope that China may ease export controls and release rare earth minerals, which are crucial for sectors like technology, defense, and green energy. Such a move could provide relief for the US supply chain and signal a potential step toward reducing trade tensions.
The stronger-than-expected US job growth in May also added to market optimism, reducing pressure on the Federal Reserve to cut interest rates. According to the CME FedWatch Tool, markets expect the Fed to maintain its interest rates at 4.25% to 4.50% in June and July, with a 54.7% chance of a rate cut in September.
Gold prices currently hover around $3,330, maintaining support above the $3,300 level. Resistance is near the $3,350 mark, and a breakthrough could push prices toward the $3,375 high from last Friday. The next significant resistance lies at $3,392, with a potential move toward the April all-time high of $3,500 if bullish momentum builds.
However, the Relative Strength Index (RSI) on the daily chart suggests indecision among traders, signaling a lack of clear momentum. In case of a downside move, immediate support is found at the 20-day Simple Moving Average (SMA) near $3,303, with further support at the $3,300 psychological level and the 50-day SMA around $3,270. If gold falls below this, the $3,240 mark could act as the next key support.
The direction of gold prices will depend on upcoming economic data and geopolitical developments, making it a key market to watch in the days ahead.
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