Gold prices (XAU/USD) continued to drift lower during the Asian session on Monday, trading below the $3,300 mark, down 0.75% for the day. Despite mixed signals from the US and China, investors remain cautiously optimistic about a potential de-escalation of trade tensions between the two largest economies. Additionally, a decline in China’s gold consumption in the first quarter of 2025 is contributing to a reduction in demand for the traditionally safe-haven asset.
Recent data from the China Gold Association revealed that the country’s gold consumption fell 5.96% year-on-year to 290.492 tonnes in Q1 2025. The drop was largely attributed to high gold prices, which have restrained demand for gold jewelry, which plummeted by 26.85% to 134.531 tonnes. On the other hand, the consumption of gold bars and coins surged by 29.81% to 138.018 tonnes.
US Dollar (USD) dynamics have also played a role in limiting further losses for gold. Despite the recent recovery of the USD, buoyed by a strong performance last week, there are lingering expectations that the Federal Reserve will resume its rate-cutting cycle in June, potentially lowering borrowing costs by a full percentage point in 2025. These expectations, coupled with ongoing geopolitical risks, such as the Russia-Ukraine conflict, continue to provide some support for gold.
The geopolitical backdrop remains complex, as North Korea confirmed its involvement in the Russia-Ukraine conflict, sending troops to fight alongside Russian forces. US President Donald Trump called for an end to Russia’s attacks, while US Secretary of State Marco Rubio warned that the US might pull away from peace efforts if progress stalls. These developments are contributing to gold’s resilience.
Looking ahead, investors will focus on key US economic releases this week, including the JOLTS job openings report on Tuesday, US Personal Consumption Expenditures (PCE) data on Wednesday, and the highly anticipated non-farm payrolls (NFP) report on Friday. These reports could provide vital clues about the Fed’s next policy moves and influence gold’s near-term direction.
From a technical perspective, gold prices are holding steady below the 38.2% Fibonacci retracement level. Bears are awaiting further weakness below the $3,265-3,260 support zone, which could signal a breakdown and lead to a potential extension of the recent corrective decline. If gold manages to break decisively above the $3,300 mark, it could face resistance around $3,331-3,332, with further gains likely capped near the $3,366-3,368 region. A successful break above these levels could open the door for a rally towards the $3,400 mark and beyond.
