Key Takeaways
- Gold (XAU/USD) experienced a significant decline, trading near $3,925, driven by a renewed risk-on market sentiment.
- Optimism surrounding a potential US-China trade truce, fueled by upcoming US-China presidential talks, is a primary driver of this shift.
- The precious metal has corrected approximately 10% from its recent all-time high amidst profit-taking and portfolio rebalancing.
- Market attention is also focused on the Federal Reserve’s upcoming interest rate decision, with a cut largely anticipated, shifting focus to Chair Powell’s commentary.
- Technical indicators suggest a bearish short-term trend for XAU/USD, with immediate support levels to watch.
Gold Prices Dip Amidst Trade Optimism and Fed Anticipation
Gold (XAU/USD) extended its losses on Tuesday as investors moved away from safe-haven assets, embracing a renewed risk-on sentiment. At the time of writing, XAU/USD was trading around $3,925, marking a nearly 1.3% decrease for the day after briefly falling below the $3,900 mark—its lowest level in three weeks.
The prevailing risk-on tone is largely supported by optimism surrounding a potential US-China trade truce. Investors are closely watching the anticipated meeting between US President Donald Trump and Chinese President Xi Jinping, scheduled to take place on Thursday on the sidelines of the APEC summit in South Korea.
The precious metal has now seen a correction of approximately 10% from its all-time high of $4,381 reached last week. This pullback reflects traders booking profits and rebalancing portfolios following a historic rally. The current downward movement is being interpreted as a healthy correction phase, with some investors repositioning ahead of the Federal Reserve’s (Fed) interest rate decision due on Wednesday.
Market Movers: Trade Optimism Dominates Sentiment
Markets are largely anticipating the Fed will implement a second interest rate cut, following a quarter-point reduction in September, its first since December 2024. However, with this rate cut extensively priced in, the primary focus is expected to be on Fed Chair Jerome Powell’s subsequent remarks. A dovish tone from Powell could reignite demand for the non-yielding metal by reinforcing expectations of further monetary policy easing. Conversely, a hawkish stance might limit upside momentum and keep Gold near its recent lows.
On Monday, US President Donald Trump expressed a positive outlook on the trade negotiations, stating he has a lot of respect for President Xi and believes both nations are going to come away with a deal. This sentiment followed reports that US and Chinese negotiators had reached a preliminary agreement over the weekend, setting the stage for the upcoming Trump-Xi meeting.
💡 The recent progress has helped alleviate concerns about a renewed escalation of trade tensions, especially with the current trade truce set to expire on November 10. On Sunday, US Treasury Secretary Scott Bessent indicated that China would defer new rare-earth export controls for one year and commit to substantial purchases of US soybeans, while the threat of 100% tariffs on Chinese goods is now considered effectively off the table.
President Donald Trump also met with Japanese Prime Minister Sanae Takaichi in Tokyo on Tuesday for bilateral discussions centered on trade and economic security. Both leaders announced a new agreement concerning rare-earth and critical minerals, aimed at strengthening supply chains and reducing reliance on China. Japan additionally pledged to increase its imports of US agricultural products and vehicles.
✅ The US has also concluded new trade agreements with several Southeast Asian partners, announced on Sunday. These deals encompass reciprocal tariff pacts with Malaysia and Cambodia, alongside preliminary trade frameworks with Thailand and Vietnam.
📊 A Reuters poll released on Monday indicated that analysts forecast Gold to average $4,275 per ounce in 2026. The survey, which included 39 analysts and traders, also revised the 2025 forecast upward to $3,400 from $3,220 in July. These elevated projections are attributed to persistent geopolitical uncertainty, strong central bank demand for gold, and expectations of further interest rate cuts by the Fed, all contributing to a positive long-term outlook for the precious metal.
📍 Total known global gold ETF holdings decreased for the third consecutive day, reaching 98.19 million ounces as of October 24. This marks the first net weekly outflow after eight consecutive weeks of inflows. Despite this recent dip, holdings remain near a three-year high and are still showing a year-to-date increase of 15.62%.
⚡ Despite the recent downward price movement, the broader outlook for Gold remains constructive. The ongoing US government shutdown, persistent geopolitical uncertainties, and economic concerns create a cautious backdrop. Coupled with expectations of lower interest rates, these factors suggest that significant downside risk may be limited.
Technical Analysis: XAU/USD Declines Below $4,000 as Bearish Momentum Builds
XAU/USD is continuing its downward trend, exhibiting lower highs and lower lows on the 4-hour chart, which indicates that sellers are maintaining control. The metal is trading below the 21-, 50-, and 100-period Simple Moving Averages (SMAs). Notably, the 21-SMA has crossed below both the 50- and 100-period SMAs, confirming a firmly bearish short-term trend.
Immediate support is identified within the $3,900 to $3,890 range. A decisive breach of this level could potentially lead to a further decline towards the $3,800 region. On the upside, initial resistance is observed near $4,000, with more significant barriers located between $4,050 and $4,150. This area, where the moving averages converge, is likely to cap any recovery attempts in the near term.
The Relative Strength Index (RSI) on the 4-hour timeframe is currently in oversold territory, hovering around 28. This suggests a potential for short-term consolidation or a minor rebound before the broader downtrend potentially resumes. On the daily chart, the RSI has dipped below the 50 mark after retreating from overbought levels, indicating that further downside pressure could materialize in the medium term.
Expert Summary
The gold market is currently experiencing a downturn, driven by a shift towards riskier assets fueled by positive developments in US-China trade relations and anticipated Fed policy adjustments. While technical indicators point to short-term bearish momentum, underlying factors such as geopolitical risks and monetary policy expectations may provide support for gold in the longer term.