Gold prices drop as US President Trump and Chinese President Xi discuss trade talks

Gold Prices Decline Following Positive US-China Trade Call.
Renewed Trade Optimism Leads to a Dip in Gold Prices.
Gold Remains Strong Above $3,350 Amid Anticipation of US Jobs Data.

Despite geopolitical tensions easing and central banks adopting dovish stances, Gold prices are holding steady, bolstered by ongoing weakness in the US labor market which continues to drive demand for this safe-haven asset.

Gold prices, after reaching the significant $3,400 level during the European trading session, experienced a slight pullback yet stayed elevated as the market absorbed positive news. US President Donald Trump shared on Truth Social about a fruitful 90-minute conversation with Chinese President Xi Jinping, discussing a newly finalized trade deal, which has helped stabilize market sentiments.

This crucial discussion happened just before German Chancellor Friedrich Merz’s visit to the White House, aimed at persuading President Trump to reduce tariffs on European goods amidst escalating global trade tensions.

Simultaneously, the European Central Bank (ECB) announced a predicted 25 basis-point reduction in rates, followed by a press conference where ECB President Christine Lagarde emphasized the resilience of Euro area banks but also highlighted persistent financial stability risks. In the US, labor market data showed an increase in Initial Jobless Claims to 247,000, surpassing expectations and leading to heightened anticipation for the upcoming Nonfarm Payrolls (NFP) report. This report is expected to indicate a hiring slowdown, potentially prompting an interest rate cut by the Federal Reserve, which would decrease the opportunity cost of holding non-yielding assets like gold.

Gold Market Overview: ECB Rate Decision, Trade Discussions, and US Employment Data in Focus

The anticipated 25 bps rate cut by the ECB has shifted market attention to the accompanying Monetary Policy Statement and Press Conference, where a cautious outlook was presented by President Christine Lagarde, noting ongoing financial stability concerns.
Softening US labor data is influencing market expectations regarding the Federal Reserve’s monetary policy direction. While a rate cut in September is currently expected, further economic weakness could accelerate this timeline to July, benefiting gold prices.
Recent weak ADP employment data highlighted only 37K jobs added in the US private sector for May.
Market sentiment is cautious due to recent tariff increases by the US on steel and aluminum imports, exacerbating global trade tensions and supporting gold prices due to a weaker US Dollar.
Following the US tariff adjustments, leaders from Canada, Mexico, and the European Union have expressed their discontent, labeling these tariffs as unjust.
Mexican President Claudia Sheinbaum criticized the new tariffs as “unjust, unsustainable, and without legal grounds,” threatening retaliatory measures if no agreement is reached.
Canada and the EU have also indicated potential retaliatory actions if there are no advancements in trade discussions this week.

Gold Technical Analysis: Price Retreats from $3,400 Resistance Level

Gold prices are retreating after a recent surge to the $3,400 mark during the European session.

Currently trading below $3,370, gold finds substantial support at the $3,350 level. Despite breaking above the triangle resistance, the momentum above $3,350 has been challenging to sustain.

The 20-day Simple Moving Average (SMA) at $3,292 provides additional support. A drop below this and the triangle base near $3,290 could expose lower support zones, potentially leading to further declines.

Conversely, a move above $3,370 and surpassing Monday’s high of $3,392 could push gold prices towards the $3,400 level again, with potential to reach new highs.

Gold daily chart