Gold prices decreased by over 1.50% following a US-China tariff agreement, directing capital towards risk assets. Despite slowing US Retail Sales and mixed housing data, inflation expectations stayed high.

Gold experienced a weekly decline as market sentiment improved, with the XAU/USD now trading at $3,187 from a daily high of $3,252. Economic data showed trade within the $3,120-$3,265 range, though momentum slowed toward week’s end.

US Consumer Sentiment Decline

Consumer sentiment in the US declined in May, reflected in survey data that showed rising inflation expectations. Despite mixed housing starts and import prices rising 0.1%, the Treasury yields recovered, bolstering the US Dollar.

Slower Retail Sales point to a deceleration in April. The Atlanta Fed’s projection suggests potential US growth at 2.4% for Q2 2025. Market focus will remain on Federal Reserve’s actions and upcoming economic events.

This week’s announcement of a 90-day US-China trade pause aims to end their trade dispute. The US 10-year Treasury yield stayed steady at 4.437%, with real yields at 2.0907%.

Overall, Gold price shifts are influenced by geopolitical and economic developments, inflation outlook, and currency movements. Central bank activities and interest rate expectations also impact its value significantly.

The Influence of Economic Indicators and Policy

When we look at what’s playing out in these updates, it’s clear that gold has lost some steam—closely tied to broader shifts in risk appetite and economic data from the United States. The metal dropped by over 1.5% shortly after news broke of a temporary trade pause between Washington and Beijing. That agreement, providing a little breathing room between the two countries, appears to have nudged traders toward equities and other riskier corners of the market, pulling money out of safe havens like gold.

We’ve also seen that although certain economic indicators in the US point to softness—most notably in Retail Sales and housing starts—inflation expectations haven’t budged much. That’s telling in itself. It shows that despite a slight slowdown in consumer activity, pricing pressures still linger in the background. Treasury yields responded with a mild recovery, especially on the longer end, with the benchmark 10-year holding above 4.4%. That stabilisation, coupled with firm real yields, lent support to the US dollar, diminishing gold’s appeal further.

The Federal Reserve’s influence in all this remains central. While no immediate policy moves have been made, expectations surrounding rate cuts have begun to fray slightly as inflation proves resistant. We observe that while the Atlanta Fed’s GDPNow estimate holds at around 2.4% growth for the second quarter of next year, underlying data aren’t uniformly strong. April’s drop in Retail Sales, although not dramatic, hints at possible moderation in household spending, particularly if inflation sticks around longer than expected.

Last week, gold traded within a fairly well-defined corridor between $3,120 and $3,265. But we noticed that upward traction faded near the top of that range, and the metal has recently settled closer to $3,187—reflecting a cooler tone even as market sentiment improved elsewhere. That marks a noticeable pullback from earlier highs around $3,252, and price action shows limited momentum near short-term resistance.

We should also acknowledge that sentiment indicators have cooled. May’s consumer confidence metrics suggested increasing concern over rising living costs and future economic stability. That anxiety can be supportive for gold in the longer term, though it hasn’t translated into immediate demand.

Import prices rising by only 0.1% last month further complicate the inflation picture. This uptick, while modest, doesn’t present a convincing reason for the Fed to move aggressively on rates, leaving the door open to data-dependent decision-making in the months ahead. Still, the tone from policymakers has been cautious—watching jobs data, inflation prints, and, perhaps more importantly, inflation expectations.

As we approach the next batch of economic releases and updates from central banks, price fluctuations in metals will likely continue to hinge on Treasury yield behaviour and the strength or weakness of the dollar. We must also factor in geopolitical developments—not just agreements, but how firmly those agreements hold over time.

For now, the gold chart suggests traders have parked the metal in a neutral zone after failing to break above short-term highs. Volatility has retreated, but only temporarily. Any sharp move in upcoming inflation data or a stronger-than-expected jobs report could trigger renewed positioning. Similarly, if pricing pressures do begin to edge lower more convincingly, that could amplify bets on earlier rate cuts, which would, in turn, revive gold’s appeal.

Meanwhile, derivative markets may look to implied volatility and options skew for cues on where the market anticipates stress or opportunity. As always, risk exposure should be calibrated against macro data release times and potential policy recalibrations. The balance between inflation staying stubborn and growth cooling will likely remain the key axis of movement in the weeks ahead.

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