Gold prices remained vulnerable to further downside on Thursday as prospects of a trade deal between the US and its trading partners wiped the sheen off the yellow metal.
Safe-haven appeal of both gold and silver was affected on Thursday’s trading session after a Chinese state-affiliated media outlet reportedly said the Donald Trump administration had reached out to Beijing for initial talks.
Improving sentiments
Improved sentiment arose from optimism that the peak of tariff announcements had passed, supported by US President Donald Trump’s Tuesday signing of two orders intended to mitigate the effects of auto tariffs.
Earlier on Thursday, Trump stated a “very good probability” exists for reaching a deal with China.
He further mentioned “potential” trade agreements with India, South Korea, and Japan.
These developments lessened concerns regarding increasing trade tensions between the US and China, which in turn reduced the safe-haven demand for gold.
“The comments add to the recent optimism and further boost investors’ confidence,” Haresh Menghani, editor at FXStreet, said in a report.
At the time of writing, the most-active gold contract on COMEX was at $3,242.64 an ounce, down 2.3% from the previous close.
The contract had fallen to $3,228.35 an ounce earlier today, its lowest level since April 15.
Among other precious metals, the most-active silver contract on COMEX was down 1.3% at $32.125 per ounce.
Economic data
“Meanwhile, a surprise contraction in the US GDP and signs of easing inflationary pressures reaffirmed market bets for a more aggressive policy easing by the Federal Reserve,” Menghani said.
This might keep a lid on any further USD appreciation and act as a tailwind for the non-yielding Gold price.
On Thursday, the US Dollar strengthened following remarks from Trump, consequently pushing the safe-haven gold price down for the third straight day.
Automatic Data Processing’s Wednesday report indicated a 62,000 increase in private sector employment for April in the US.
The increase in private sector employment significantly underperformed both the revised March figure of 147,000 (originally reported as 155,000) and the anticipated 108,000.
This represents a considerable drop from the previous month and a substantial deviation from market forecasts.
Additionally, the US economy saw a contraction in the first quarter of 2025, with advance estimates from the Bureau of Economic Analysis indicating an annualised rate of 0.3%.
This follows a strong growth rate of 2.4% in the preceding quarter.
The US Personal Consumption Expenditures (PCE) Price Index saw a decrease to 2.3% year-over-year in March, down from the prior 2.5%.
“The dismal US macro data reaffirms bets that the Federal Reserve will resume its rate-cutting cycle in June,” Menghani said.
“Traders are pricing in the possibility that the US central bank will lower borrowing costs by 100 basis points by the year-end. This should cap the USD and support the non-yielding yellow metal.”
Gold breaks support of $3,260 per ounce
On Thursday, gold prices fell below the support of $3,260 an ounce.
This was an important level as prices had been hovering around $3,300 an ounce for the last few trading sessions without major breakouts.
“As far as gold is concerned, it should be added that the price is correcting after its protracted bull run,” said David Morrison, senior market analyst at Trade Nation.
“This took gold to a fresh record high of $3,500 last Tuesday, and extremely overbought levels. It then proceeded to fall sharply,” he added.
It would be wise to await confirmation of a break below the 50% Fibonacci level, near the $3,229-$3,228 area, before establishing positions to capitalise on additional declines, according to FXStreet.
After that gold prices could see a quicker drop towards the $3,200 mark and potentially extend to the 61.8% Fibonacci level around $3,160.
“It looks as if many traders are expecting prices to recover, and banking on new all-time highs,” Morrison noted.
“That’s certainly possible, particularly as there’s no compelling reason as yet for investors to rush out of safe havens and load up on tech stocks again.”
But gold remains overbought, even after this week’s pullback, and a test of $3,200 as support would be just the first staging post to help bring the MACD down to more reasonable levels
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