- Gold price limits correction and drops less than 0.7% in European trading on Thursday.
- The UK and the US will announce a trade deal that would circumvent the US tariff implementation.
- Gold sees safe haven outflow with the assumption that more deals will follow suit.
Gold (XAU/USD) adds to the prior’s day correction, slipping less than 1% to $3,343 at the time of writing on Thursday as risk sentiment improved, with United States (US) President Donald Trump expected to announce a trade deal agreement with the United Kingdom (UK) at a news conference at 14:00 GMT in Washington, according to people familiar with the matter. Meanwhile, the UK administration has confirmed to Bloomberg and the Financial Times that a deal will be announced. Details on that trade deal remain unconfirmed.
Additional driver overnight was the Federal Reserve (Fed) interest rate decision and Fed Chairman Jerome Powell’s remarks. The main takeaway from Powell’s words was that the US economy is showing signs of resilience for now. However, Powell expects the actual impact of tariffs and heightened uncertainty to impact economic numbers later this year. The central bank kept interest rates unchanged in the range of 4.25%-4.50%, confirming the markets’ assumption, as seen in the Fedwatch Tool, that a rate cut is not foreseen until summer.
Daily digest market movers: Gold Price kneejerk reaction
- In the Asian trading session, before the trade deal announcement was issued, the Gold price was climbing, after tumbling on Wednesday when the Federal Reserve held interest rates, and Chair Jerome Powell said the central bank isn’t in a rush to cut despite trade-war uncertainty, Bloomberg reports.
- That the Gold Rush is not over, even with a possible initial trade deal, can be seen with statements from several hedge funds. This Thursday, Waratah Capital Advisors Ltd. reported it is betting on Gold to lift its returns this year as investors pile into the asset to shelter their wealth during the global trade war, Bloomberg reports.
- “Big News Conference tomorrow morning at 10:00 EDT (14:00 GMT), The Oval Office, concerning a MAJOR TRADE DEAL WITH REPRESENTATIVES OF A BIG, AND HIGHLY RESPECTED, COUNTRY. THE FIRST OF MANY!!!” President Trump wrote on his social media platform “Truth Social”, The New York Times reports.
Gold Price Technical Analysis: Empty shell
Do not pop the champagne just yet with this initial trade deal between the UK and the US. Euphoria is taking place in markets on the back of these headlines, though the first element to trim the ambiance is that the UK is indeed a big economy, though with the near least exposure to the US in terms of trade. That a deal is being struck this quickly means it will probably only be on one segment, or a deal in principle.
Gold price initially traded higher this Thursday, facing rejection at the R1 resistance near $3,413. Should the signing of the deal be delayed, or if the actual deal is really just some window dressing, expect a knee-jerk reaction with Gold quickly sprinting back to that level. Once there, it is not far from the R2 resistance at $3,462.
On the downside, the S1 support at $3,338 is being tested at the time of writing. Further down, the S2 support comes in at $3,311, though technically not holding any other relevance besides being a daily pivotal level. The watchdog level, which is near $3,245, is a much stronger floor from a technical standpoint.
XAU/USD: Daily Chart
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
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