Gold reached a record high of $3,500 per ounce in April but has since pulled back to around $3,385 as of May 7. This decline is largely due to renewed optimism over U.S.-China trade talks and stronger-than-expected U.S. jobs data, which have temporarily reduced demand for gold as a safe-haven asset. Despite this short-term correction, gold remains up by 28% year-to-date, highlighting its strength amid ongoing global economic uncertainty. The key question now is whether gold can sustain its momentum through the rest of Q2.

Impact of U.S.-China Trade Talks on Gold Prices in Q2

Gold prices recently declined after news that the U.S. and China may meet in Switzerland to resolve ongoing trade tensions. If a deal is reached, it would likely ease global uncertainty and increase investor confidence. This shift could reduce demand for gold as a safe-haven asset, causing prices to fall in the short term.

 

Interest Rate Outlook and Federal Reserve Policy

Today, the Federal Reserve is anticipated to keep interest rates between 4.25% to 4.50%. Market participants, however, are expecting rate cuts beginning in July, which could lower the opportunity cost of holding non-yielding assets like gold which could increase gold prices as per analysts’ expectations. Investors are closely watching for upcoming comments from Fed Chair Jerome Powell to better understand the direction of monetary policy, particularly the timing and extent of potential interest rate cuts. Any easing tone from the Fed could also support gold prices as per analysts expectations, especially if it hints at upcoming interest rate cuts

Geopolitical Tensions and Safe-Haven Demand

Ongoing geopolitical tensions including conflicts in the Middle East, rising tensions between India and Pakistan, and instability in several other countries continue to increase demand for gold. In such situations, investors often turn to gold as a safe-haven to protect their money.

Central Bank Demand and Inflation Risks

One of the biggest drivers of gold’s price action remains central bank demand. Global central banks are purchasing around 700 tons of gold per quarter, aiming to hedge against currency volatility and reduce dependence on the U.S. dollar. Inflation risks, sustained by US trade tariffs and supply issues, continue to enhance gold’s role as a protective asset.

Short Term Technical Point of View

 

From a technical standpoint, gold's recent peak during Q2 (May) at $3,500 has established a resistance level, and gold is trading nowadays within a descending triangle pattern, with lower highs forming a downward resistance line and horizontal support around $3,360. This setup suggests consolidation, and a breakout above the trendline could signal renewed bullish momentum, while a drop below $3,360 may open the door for a retest of the stronger $3,200 support level as per analysts expectations.

 

                                                                                                     Figure 1: XAUUSD, 4H, Tradingview