Gold prices fell by almost 2% in early Monday trading following news of a 90-day agreement between China and the United States to reduce tariffs against each other. The development was welcomed by investors, who responded by shifting towards riskier assets, fuelling a sharp rally in global equities. This temporary truce between the world’s two largest economies has reduced the likelihood of a US recession and improved the broader outlook for global growth—diminishing the appeal of traditional safe-haven assets such as gold. Adding further pressure on bullion, the US dollar regained strength, buoyed by positive trade sentiment and the Federal Reserve’s hawkish stance on interest rates last week. The inverse correlation between gold and the dollar amplified the downside move. Completing a trio of negative catalysts for gold, tensions between India and Pakistan have eased, and there are growing hopes of progress in the Russia-Ukraine conflict, with both sides reportedly moving towards direct negotiations. Given this backdrop, gold prices may face further downward pressure and could test the key support level near $3,200.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
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