- Gold price snaps below $3,300 on Tuesday, seeking support near a key level to bounce off.
- Improving market sentiment due to US-EU trade talk efforts dampens safe-haven demand.
- A stronger Greenback is acting as headwind after Japan considers reducing its debt issuances.
Gold (XAU/USD) price is trading near $3,293 at the time of writing on Tuesday as risk-on and a stronger US Dollar (USD) are making the precious metal bleed. Gold extends its decline for a second day this week as the US dollar caught up with some gains and demand for haven assets cooled, with investors also weighing prospects for improving trade relations between the US and the EU after US President Donald Trump said on Sunday that he agreed to an extension on the 50% tariff deadline on the European Union (EU) until July 9.
The stronger USD gained momentum at the end of Asian trading after the Japanese Ministry of Finance (MoF) stated that its bond issuance plan might see some tweaking, with lower volumes. This made Japanese yields collapse and saw the Japanese Yen (JPY) devalue against the US Dollar, triggering a spillover effect in favor of the Greenback against several other major currencies. A stronger US Dollar makes Gold more expensive for most buyers, and thus it is seen as a headwind.
Daily digest market movers: Gold vs Silver and Platinum
- Exchange Traded Funds (ETFs) flows for gold relative to peers such as silver and palladium is showing reduced demand for bullion. Accumulations into gold ETFs have turned negative this month, halting what had been the strongest stretch of monthly inflows to start the year since 2022. Meanwhile, ETFs increased their holdings of silver, platinum and palladium, Bloomberg reports.
- Demand for safer assets like Gold has been impacted as signs emerge that the White House may be making progress in negotiations with some trading partners. Gold-backed Exchange Traded Funds (ETFs) registered five straight weeks of outflows since peaking at the highest in more than a year in mid-April, Bloomberg reports.
- One of China’s biggest Gold miners is planning its second US Dollar bond offering in two weeks, the latest in a slew of global companies looking to tap growing investor interest in the precious metal. Shandong Gold Group is considering issuing a roughly $100 million perpetual bond as soon as this week. The potential sale comes after it already raised $300 million via a three-year bond offering earlier this month, Bloomberg reports.
- Harmony Gold Mining Co. has agreed to buy MAC Copper Ltd., enabling the top producer of South African Gold to gain a further foothold in Australia and increased exposure to Copper. Harmony is offering $12.25 for each MAC share, implying a total equity value for the Australian company of about $1.03 billion, Reuters reports.
- There are still tailwinds at play, with markets remaining in wait-and-see mode, weighing several risks, including the swelling US deficit, ongoing trade talks, and worsening conflicts in the Middle East and Ukraine.
Gold Price Technical Analysis: Looking for the support elements in this rally
Some downside pressure appears on Gold’s price this week. The headwinds mentioned above could be proven quite persistent, as the US Dollar has already experienced a long stretch of devaluation and is due for some recovery at the expense of the precious metal. Add some more possible positive signs on trade talks, and any prospects of Gold extending its highs might fall short of expectations.
On the upside, the daily Pivot Point at $3,341 is the first level to look out for, followed by the R1 resistance at $3,359. Further up, the R2 resistance at $3,374 follows not far behind and could open the door for a return to the $3,400 round level and potentially further course to $3,440, coinciding with May 6 and May 7 peaks.
On the other side, some thick-layered support emerges in case the Gold price declines. In case the $3,300 mark breaks, some intermediary support could come from the S2 support at $3,275. Further below, there is a technical pivotal level at $3,245 (April 11 high).
XAU/USD: Daily Chart
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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