01/05/25

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Gold prices have continued to decline for the third consecutive day, recently falling below the crucial support level of $3,260. As the US Dollar gains strength due to positive sentiments surrounding potential trade agreements with Asian nations, the demand for gold as a safe-haven asset diminishes. This downturn signifies a breakdown from a rising price channel, putting the 21-day Simple Moving Average (SMA) at $3,230 in jeopardy.

The fall in gold prices has coincided with news of anticipated trade negotiations, overshadowing recent US economic data. Optimistic statements about potential trade deals with countries such as India, South Korea, Japan, and a more conciliatory stance toward China have bolstered the US Dollar and dampened gold’s appeal. The ongoing expectations of a resolution to US-China trade tensions are contributing to the metal’s downward trend.

Despite the upbeat sentiment regarding trade, the market is largely disregarding the Senate’s rejection of a bipartisan proposal aimed at challenging tariffs imposed by the Trump administration, as well as assertions from US Trade Representative Jamieson Greer that no official discussions are currently taking place with China. Consequently, gold’s movement hinges heavily on fluctuating trade developments, with short-lived reactions to US economic indicators. Traders are looking ahead to critical data releases, including the ISM Manufacturing PMI and Jobless Claims, as they prepare for Friday’s Nonfarm Payrolls report.

Recent data has indicated that the US economy contracted by 0.3% in the first quarter of the year, with businesses reportedly ramping up imports in anticipation of tariffs. The core Personal Consumption Expenditures (PCE) Price Index, excluding food and energy, saw a slight decrease in growth. Although gold temporarily surged above $3,300 following the release of the GDP data, it struggled to maintain its gains.

As of now, the recent drop in gold prices has confirmed a shift below an upward trend line, necessitating a sustainable defense of the 21-day SMA at $3,230 to provoke a potential reversal. Should gold manage to stabilize at this level, it may afford buyers an opportunity to target previous resistance near $3,383. Conversely, a decisive breach below the 21-day SMA could set the stage for further declines towards the psychological threshold of $3,150, with the 50-day SMA at $3,081 becoming a point of interest for sellers.