Gold prices are under pressure, dropping to $3,135, the lowest since April 10. This is influenced by US-China trade optimism and rising US bond yields, reducing the demand for safe-haven assets like gold. The truce between the US and China for 90 days decreases recession concerns, affecting expectations for Federal Reserve policy adjustments and enhancing Treasury bond yields.

Despite positive factors, US Dollar bulls are cautious, awaiting the US PPI data and Fed Chair Jerome Powell’s speech. The release of this data could impact the USD and provide momentum to the gold market, but current geopolitical risks provide limited support for gold. Technical analysis shows a recent fall below the 61.8% Fibonacci level, indicating further potential drops to the $3,100 support zone. Resistance lies at $3,168-3,170, with recovery facing challenges up to around $3,230.

Federal Reserve Monetary Policy

The Federal Reserve’s monetary policy affects interest rates and the USD, through measures like Quantitative Easing (QE) and Quantitative Tightening (QT). QE involves buying bonds to increase circulation, often weakening the USD, while QT does the opposite, usually strengthening it. The Fed holds eight policy meetings annually to decide on monetary strategies.

Gold’s recent slide, falling beneath $3,135 and teetering towards the $3,100 mark, reflects a shift in mood driven by overseas tailwinds rather than domestic cracks. A temporary easing in trade tensions between China and the United States has eased recession fears, trimming demand for traditional hedges like bullion. Naturally, with less fear pulsing through the system, investors are sliding back into riskier assets and pulling away from metals, which has dragged prices downwards.

One should keep in mind that this move isn’t rooted in heavy selling or panic—it’s more a natural consequence of strengthening US Treasury yields. Bond yields typically rise when economic optimism returns, and in turn, they often draw funds away from non-yielding assets. In this case, gold seems to be caught in that rotation. This is further exacerbated by the dynamics around the greenback.

Though the dollar has shown bouts of resilience, bullish momentum remains somewhat restrained ahead of upcoming inflationary data and commentary from the Federal Reserve’s leadership. What we’re looking at is a market that’s wary of overcommitting before more clarity emerges. Current geopolitical tensions aren’t vanishing overnight, but they’re not loud enough to support a meaningful rebound in gold yet.

Economic Indicators and Gold

From a technical standpoint, the recent dip through the 61.8% Fibonacci level offers a fairly clear signal. Historically, such a breach hints at additional downside, and with the next support sitting just shy of $3,100, that marker could be tested if sentiment doesn’t shift. Resistance on the way back up isn’t soft either. Any attempt at recovery would first need to face the $3,168–$3,170 zone, an area where buyers have already struggled to take control in previous sessions. Past that, $3,230 stands as a tougher ceiling.

We’re also factoring in the broader macro picture. Expectations for the central bank’s moves over the coming months remain tightly linked to economic indicators, especially inflation-related data. As such, the Producer Price Index print and Powell’s upcoming remarks could tilt risk sentiment quite abruptly. Strong data could reinforce the case for tighter conditions, in which case bond yields might spike again, leaving gold vulnerable.

Monetary policy remains the primary lever here—especially in the form of asset purchases or reductions in the central bank’s balance sheet. When the Fed engages in quantitative easing, for example, it typically floods the system with liquidity, which weakens the dollar and can buoy commodities. Conversely, tightening removes that liquidity, often bolstering the dollar and pressuring gold.

There’s little doubt: the market remains data-sensitive. Short-term positioning should be nimble, tied closely not only to price levels but to macro signals that might push yields higher or lower. Patience may be required at this juncture, but a reactive rather than predictive stance could offer better risk-adjusted entries as volatility rises into key economic releases.

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