Gold prices rebounded on Thursday, reversing two days of losses with a notable increase of $50, or over 1.50%, driven by renewed fears surrounding the US-China trade war. Despite US President Donald Trump’s recent shift in stance on tariffs—softening his position on imposing 145% tariffs on Beijing—XAU/USD traded at $3,338, recovering from daily lows of $3,287.
The market sentiment remained positive, as Wall Street posted gains. While traders showed relief over Trump’s willingness to reach a trade deal with Beijing, China remained firm, demanding the cancellation of all “unilateral” US tariffs. Additionally, Beijing clarified that they had not held any formal talks with the US government.
Gold’s rally was further supported by a significant drop in US Treasury bond yields, which contributed to weakness in the US dollar. The US Dollar Index (DXY) experienced pressure, pulling back after hitting four-day highs against a basket of six major currencies.
US Economic Data and Fed Comments
US economic data showed stability in the labor market, with Initial Jobless Claims for the previous week aligning with expectations. March’s Durable Goods Orders surged 9.2%, significantly higher than forecasts, driven by a surge in aircraft orders.
The Federal Reserve also captured attention as a wave of officials made public statements. Cleveland Fed President Beth Hammack suggested the central bank could act as soon as June if economic data supports such a move, noting that uncertainty continues to weigh on business decisions. Similarly, Fed Governor Christopher Waller acknowledged the possibility of a June rate action but emphasized that rate cuts could be triggered by a weakening labor market, particularly rising unemployment.
Markets are largely anticipating that the Fed will keep rates unchanged at its upcoming meeting, with a 94% probability, according to Prime Market Terminal. However, traders expect the Fed funds rate to end the year at 3.45%, implying 86 basis points of potential easing.
Market Movers: Weak US Dollar and Plunging Treasury Yields
Gold’s upward momentum was fueled by weak US economic data and declining Treasury yields. The yield on the US 10-year Treasury note dropped by seven-and-a-half basis points to 4.31%, while US real yields fell by seven basis points to 2.023%, according to the US 10-year Treasury Inflation-Protected Securities (TIPS) yields.
Durable Goods Orders saw a massive increase of 9.2% in March, thanks to strong demand for airplanes, while Initial Jobless Claims for the week ending April 19 rose by 222,000, in line with expectations.
XAU/USD Technical Outlook: Gold’s Uptrend Resumes
Gold’s uptrend has resumed, but buyers will need to break the April 22 high of $3,386 to prevent a pullback. The next resistance levels to watch are $3,400, $3,450, and $3,500.
On the downside, if XAU/USD falls below the $3,300 mark, it could open the door to test the $3,200 level, followed by the April 3 peak of $3,167. A further decline below this level could target the 50-day Simple Moving Average (SMA) at $3,041.
