Gold prices (XAU/USD) have shown a slight recovery from their session lows, hovering around the $3,360 mark during the Asian session. However, the precious metal remains under pressure, reflecting a generally weaker sentiment as optimism surrounding the resumption of US-China trade talks in Switzerland this week dampens demand for safe-haven assets.
The US Dollar (USD) has gained some traction, driven by repositioning trades ahead of the upcoming Federal Open Market Committee (FOMC) policy decision. The strengthening dollar is another headwind for gold, reducing the appeal of the non-yielding metal for investors.
Despite the stronger dollar, USD bulls have been hesitant to place aggressive bets, choosing instead to await the outcome of the two-day FOMC meeting. Meanwhile, persistent geopolitical risks, including the ongoing Russia-Ukraine war, tensions in the Middle East, and escalating military activity along the India-Pakistan border, continue to support gold as a safe-haven asset. These factors provide some support for the yellow metal, even as bearish sentiment lingers.
Key Market Movers: Gold Faces Mixed Sentiment Ahead of FOMC Decision and Geopolitical Risks
US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are scheduled to meet Chinese officials in Switzerland this weekend for high-level trade talks. This marks the first direct dialogue between the two countries since the US imposed tariffs on China, offering a potential step towards resolving the trade war.
On the domestic front, President Donald Trump indicated on Tuesday that he and senior officials would review trade deals over the next two weeks to decide which ones to accept, though this contradicts earlier statements that deals could be announced this week. Trump also announced new 100% tariffs on foreign films and hinted at additional tariffs on pharmaceuticals in the coming weeks. These trade developments contribute to market uncertainty and bolster demand for gold.
Geopolitical risks remain a key factor for investors. A Kremlin spokesperson confirmed Russia’s plans to unilaterally impose a ceasefire between May 8 and May 11 but warned of an immediate response if Ukraine does not reciprocate. Meanwhile, in the Middle East, Israel’s security cabinet has approved plans for a wider military operation in Gaza, which is expected to commence after Trump’s upcoming visit to the region.
Market participants are also closely watching the Federal Reserve’s decision, set to be announced later today. The accompanying policy statement and Fed Chair Jerome Powell’s comments will be pivotal in shaping future rate-cut expectations, driving demand for the US Dollar and potentially influencing gold prices.
Technical Outlook: Gold Price Faces Critical Resistance and Support Levels
On the technical front, gold recently broke through the $3,360-$3,365 resistance zone and briefly surpassed the $3,400 mark, triggering optimism among bulls. However, momentum has stalled near the $3,430-$3,435 resistance zone, which now serves as a key hurdle. A break above this level could see gold targeting its all-time highs from April, potentially reaching the $3,500 psychological mark.
Conversely, a decline below the $3,365-$3,360 support area could see gold finding additional support near the $3,328-$3,327 region, followed by the $3,300 level. Failure to hold these support zones could lead to a deeper pullback, with potential downside targets at $3,265-$3,260 and last week’s swing low around $3,200.
