At a Glance
- Gold (XAU/USD) recovered some ground on Monday, trading at $4,280 after a significant dip on Friday from record highs.
- Easing US-China trade tensions, driven by President Trump’s comments, spurred a brief market recovery and a stronger US Dollar.
- Persistent geopolitical uncertainty, a dovish Federal Reserve outlook, and the ongoing US government shutdown continue to support gold.
- Market participants are closely watching upcoming US-China diplomatic meetings and key economic data, including the US CPI report.
- Technical analysis shows XAU/USD stabilizing above $4,250, with immediate support at $4,200 and resistance at $4,300.
Gold Price Recovers Amid Market Uncertainty
Gold (XAU/USD) is trading higher on Monday, showing a modest recovery after experiencing a sharp decline on Friday from its record highs near $4,380. Currently in the European session, the yellow metal is priced around $4,280, marking a gain of over 0.50% for the day.
Friday saw the largest intraday drop for gold since mid-May, with prices falling 1.76%. This pullback occurred as investors took profits following remarks from US President Donald Trump regarding China. Trump’s more conciliatory tone, suggesting that threatened 100% tariffs were not sustainable, helped to calm market sentiment. This shift led to a rebound in both the US Dollar (USD) and Treasury yields.
Navigating Trade Tensions and Economic Factors
While the de-escalation of trade tensions provided short-term relief, market participants remain watchful due to President Trump’s unpredictable trade rhetoric, which continues to contribute to global uncertainty. The market appears hesitant to commit strongly in either direction, awaiting further developments from US-China relations and upcoming diplomatic engagements.
The lack of sustained selling pressure on Monday suggests that gold’s retreat may have been a corrective pause rather than the beginning of a significant reversal. Investors are actively reassessing the broader macroeconomic landscape.
💡 The precious metal continues to find support from the Federal Reserve’s dovish policy stance, the prolonged US government shutdown, and ongoing geopolitical and economic instability. These factors, coupled with steady demand from central banks and robust inflows into gold-backed ETFs, are keeping the broader upward trend for gold intact.
Market Movers: US-China Talks and Economic Data in Focus
- President Donald Trump stated on Monday that the US is not looking to hurt China and outlined key demands for the upcoming trade talks. These include increased Chinese purchases of soybeans, the cessation of rare-earth export restrictions, and stricter controls on fentanyl.
- US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are scheduled to meet in Malaysia this week to resume dialogue following last week’s trade tensions.
- A Reuters report indicates that global companies estimate they have collectively absorbed over $35 billion in costs stemming from US tariffs. Analysis of corporate statements and filings suggests a projected financial impact of $21-22.9 billion in 2025 and nearly $15 billion in 2026.
- Renewed clashes erupted in the Gaza Strip early Monday after Israel launched airstrikes in response to alleged ceasefire violations by Hamas overnight. This has reignited concerns about a wider regional escalation.
- The ongoing US government shutdown has now entered its twentieth day without a clear resolution. Repeated failures by the Senate to approve a temporary funding measure, marking the tenth unsuccessful attempt to end the stalemate, leave lawmakers expected to vote again upon the Senate’s return on Monday.
- The US economic calendar for the week is relatively light. The primary focus will be on the Consumer Price Index (CPI) report scheduled for Friday, which was previously postponed due to the government shutdown. Preliminary S&P Global Purchasing Managers’ Index (PMI) readings for October are also expected on Friday. Federal Reserve officials have entered their pre-meeting blackout period ahead of the Federal Open Market Committee (FOMC) meeting scheduled for October 29-30.
Technical Analysis: XAU/USD Stabilizes Above Key Levels
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The XAU/USD pair is steadying after Friday’s significant pullback from its record highs, suggesting a potential short-term peak may have been formed near the all-time high of approximately $4,380. On the 4-hour chart, spot prices are currently trading above the 21-period Simple Moving Average (SMA), which is positioned at $4,256.
Immediate support is observed near the $4,200 level, where buying interest appears to be emerging. A sustained break below this threshold could lead to further downside, potentially testing the 50-period SMA located around $4,140.
On the upside, the $4,300 mark serves as the immediate resistance level. A decisive move above this price could pave the way for a retest of the aforementioned all-time high.
📊 The Relative Strength Index (RSI) is holding steady around 57, indicating a recovery after previously retreating from overbought conditions. As long as the RSI remains above the 50 level, the technical setup suggests a phase of healthy consolidation rather than a deeper correction, supporting the continuation of the broader bullish trend for gold.
Gold FAQs
What is gold’s historical significance and current role?
Gold has been a critical part of human history, serving as a store of value and medium of exchange. Beyond its aesthetic appeal and use in jewelry, gold is widely recognized as a safe-haven asset, making it a favored investment during times of market turmoil. It is also considered a hedge against inflation and currency depreciation, as it is not tied to a specific issuer or government.
Why do central banks hold significant gold reserves?
Central banks are the largest holders of gold. They often diversify their reserves and acquire gold to bolster their currencies during volatile periods, thereby enhancing the perceived strength of their economy and currency. Substantial gold reserves can serve as a crucial indicator of a country’s solvency and reliability. According to the World Gold Council, central banks added approximately 1,136 tonnes of gold, valued at around $70 billion, to their reserves in 2022, marking the highest annual purchase on record. Emerging economies, including China, India, and Turkey, are notably increasing their gold holdings.
What is the correlation between gold and other assets?
Gold typically exhibits an inverse correlation with the US Dollar and US Treasuries, both significant reserve and safe-haven assets. When the US Dollar depreciates, gold prices tend to rise, offering investors and central banks a means to diversify their assets during uncertain times. Gold also shows an inverse correlation with risk assets; a rally in the stock market often weakens gold prices, while sell-offs in riskier markets tend to benefit the precious metal.
What factors influence the price of gold?
Gold prices can be influenced by a wide array of factors. Geopolitical instability or fears of a severe recession can rapidly drive up gold prices due to its safe-haven status. As an asset that does not yield interest, gold tends to perform well in environments of lower interest rates, whereas higher borrowing costs typically weigh on its price.
⚡ However, many significant price movements are linked to the behavior of the US Dollar, as gold is priced in USD (XAU/USD). A strong dollar generally exerts downward pressure on gold prices, while a weaker dollar is likely to lead to an increase in gold prices.
Expert Summary
Gold experienced a moderate recovery on Monday, rebounding from a sharp decline on Friday that saw it pull back from record highs. The market is weighing easing US-China trade tensions against persistent global uncertainties, including the ongoing US government shutdown and geopolitical risks.
Key economic data, particularly the upcoming US CPI report, and developments in US-China relations will be critical in shaping gold’s price direction in the near term, while technical indicators suggest a potential consolidation phase within the broader bullish trend.