• Gold price attracts sellers for the fourth consecutive day on Thursday in reaction to the tariffs-block news.
  • Hawkish FOMC Minutes further weigh on XAU/USD, though a modest USD pullback lends some support.
  • US-China trade tensions and geopolitical risks contribute to limiting the downside for the precious metal.

Gold price (XAU/USD) struggles to capitalize on its intraday recovery from over a one-week low and remains below the $3,300 mark through the first half of the European session on Thursday, still in the red for the fourth straight day. The global risk sentiment gets a strong boost in reaction to a federal court ruling against US President Donald Trump’s ‘liberation day’ trade tariffs. This continues to act as a headwind for the safe-haven bullion on the back of Wednesday's hawkish FOMC Minutes.

Investors, however, are still pricing in the possibility that the Federal Reserve (Fed) will cut interest rates further in 2025. Apart from this, worries about the worsening US fiscal condition prompt some intraday US Dollar (USD) selling, which, in turn, should act as a tailwind for the non-yielding Gold price. Apart from this, persistent geopolitical risks might further hold back the XAU/USD bears from placing aggressive bets and warrant some caution before positioning for deeper losses ahead of US data.

Daily Digest Market Movers: Gold price bulls seem non-committed amid the upbeat market mood

  • A US federal court on Wednesday blocked US President Donald Trump's "Liberation Day" tariffs from going into effect. The Court of International Trade ruled that the president overstepped his authority by imposing across-the-board duties on imports from every country in the world.
  • Investors cheered the court's order, which is evident from a sharp rise in the equity markets on Thursday. This, in turn, is seen weighing heavily on traditional safe-haven assets and dragging the Gold price lower for the fourth successive day amid a strong follow-through US Dollar buying.
  • The better-than-expected US macro data this week calmed recession fears. Adding to this, Minutes of the Federal Reserve's May meeting released on Wednesday revealed a consensus to maintain the wait-and-see stance on rates amid the uncertainty over the economic outlook and trade policies.
  • Fed officials highlighted the need to keep interest rates on hold for some time until the net economic effects of the array of changes to government policies become clearer. This, in turn, lifts the USD Index (DXY) beyond the 100 mark and undermines the non-yielding yellow metal.
  • Meanwhile, the Trump administration is reportedly moving to restrict the sale of critical US technologies, including those used in the manufacturing of semiconductors, and certain chemicals, to China. This, along with persistent geopolitical risks, offers support to the XAU/USD pair.
  • Israel's defence minister Israel Katz announced on Wednesday that their fighter jets struck the target of the Houthi militant group at Yemen’s Sanaa airport for the second time in a month. This strike comes after the Houthis had fired several missiles at Israel in recent days.
  • Russia has proposed holding the next round of direct peace talks with Ukraine in Istanbul on June 2 amid rising pressure from Trump to end the war. Russian sources said that President Vladimir Putin wants a written pledge by Western powers not to enlarge the US-led NATO alliance eastwards.
  • Traders now look forward to Thursday's US economic docket – featuring the release of the Prelim Q1 GDP print, Weekly Initial Jobless Claims, and Pending Home Sales. The focus, however, remains on the US Personal Consumption Expenditure (PCE) Price Index on Friday.

Gold price remains vulnerable while below the $3,300 mark, 200-period SMA pivotal support on H4

From a technical perspective, the intraday downfall stalls near the 50% retracement level of the recent goodish recovery from the monthly swing low. However, Wednesday's breakdown below a short-term ascending trend line and the 200-period Simple Moving Average (SMA) on the 4-hour chart favor bearish traders. Adding to this, negative oscillators on the said timeframe suggest that the path of least resistance for the Gold price is to the downside.

Hence, any subsequent recovery is more likely to confront a stiff barrier and remain capped ahead of the $3,300 mark, or the 200-period SMA on the 4-hour chart. However, some follow-through buying, leading to a further move beyond the 23.6% Fibonacci retracement level, might trigger a short-covering rally and lift the Gold rice to the $3,324-3,325 hurdle en route to the next relevant resistance near the $3,345-3,350 supply zone.

On the flip side, bearish traders might now wait for sustained weakness below the Asian session low, around the $3,246-3,245 region (50% retracement level), before placing fresh bets. The subsequent fall might then drag the Gold price to the 61.8% Fibo. retracement level, around the $3,215 region. The downward trajectory could extend towards the $3,200 round figure before the XAU/USD eventually drops to the $3,180 support.

Risk sentiment FAQs

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

Source: Fxstreet