Gold corrects from new all-time highs as US makes progress in trade talks

• Gold price retraces below $3,300 as US President Trump signaled progress in trade talks with Japan and Mexico.
• The US-China dignity war will keep the downside of the Gold price limited.
• US-Japan trade talks and Fed Powell’s hawkish remarks have offered some relief to the US Dollar.

Gold price (XAU/USD) corrects to near $3,290 in Thursday’s North American session after hitting a fresh all-time high of $3,358 earlier in the day. The precious metal faces some profit-booking as meaningful progress in trade negotiations by the United States (US) with Japan and Mexico has offered some relief on fears of potential global economic turmoil. However, US-China trade tensions would continue to protect the downside in the Gold price.

“Had a very productive call with the President of Mexico yesterday. Likewise, I met with the highest-level Japanese Trade Representatives. It was a very productive meeting. Every Nation, including China, wants to meet! Today, Italy! US President Donald Trump wrote in a post on Truth.Social platform in late European trading hours on Thursday. 

Positive development in trade talks by Washington with its trading partners indicates that US President Trump has used the tariff tool to have a dominant position while negotiating bilateral deals with his trading partners. This has resulted in a slight ease in global market uncertainty.

Meanwhile, the intensified trade war between the US and China is sufficient to keep the risk-appetite theme at bay. Precious metals tend to perform better in heightened global economic tensions.

The tussle between the US and China has become more of a battle of dignity than a scale of tariffs. The US wants China to initiate trade talks first, citing that they need our money. Meanwhile, China is willing to come to the table, but with respect and mutual interest. On Tuesday, White House press secretary Karoline Leavitt said that the President wants China to go first for trade talks. “The ball is in China’s court: China needs to make a deal with us, we don’t have to make a deal with them,” Leavitt said.

Daily digest market movers: Gold price corrects while US Dollar attracts some bids

• Investors cash in some longs in the Gold price after it reached an all-time high of $3,358 on Thursday. The slight correction in the precious metal’s price is also driven by a nominal recovery in the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, attracts bids near the three-year low of 99.00 and moves higher to near 99.45, at the time of writing.
• Trump’s preference for trade talks over imposition of hefty reciprocal tariffs has lightened uncertainty across the globe, which is clear from a slight recovery move in the US Dollar. Technically, a higher US Dollar makes investment in Gold expensive for investors.
• The USD Index faced a ruthless sell-off in the past few months as market experts became highly pessimistic on the US economic growth in the face of Trump’s tariff policies. Market participants anticipated that the imposition of higher duties on all imports into the US would lead to an increase in inflation and impact economic growth.
• Additionally, a slight hawkish commentary from Federal Reserve (Fed) Chair Jerome Powell at the Economic Club in Chicago on Wednesday offered some relief to the US Dollar. Powell signaled that the US economy is still firm despite Trump’s economic policies, which have stemmed economic risks. “The US economy is solid despite heightened uncertainty, downside risks,” Powell said. He was confident that the economy is still in a position to wait for greater clarity, which gives them confidence to avoid any monetary policy adjustments.
• However, Trump has accused him of being “too late and wrong”. “The European Central Bank (ECB) is expected to cut interest rates for the 7th time, and yet, “too Late” Jerome Powell of the Fed, who is always too late and wrong, yesterday issued a report which was another, and typical, complete mess!,” Trump said in a post on Truth.Social.

Technical Analysis: Gold price extends correction below $3,300

Gold price falls from its all-time high of $3,358 on Thursday. However, the overall outlook of the Gold price remains bullish as all short-to-long Exponential Moving Averages (EMAs) are sloping higher.

The 14-day Relative Strength Index (RSI) trades above 70.00, suggesting a strong bullish momentum.

Looking down, the 20-day EMA near $3,135.50 will act as a key support zone for the pair. On the upside, the round-level resistance of $3,400 will act as a key resistance zone.

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