Gold prices dropped over 1.50% due to improved risk appetite influenced by global developments. Factors like easing tensions between Israel and Iran, a US-China trade agreement, and potential commercial accords between the US and other countries have affected the safe-haven demand for gold.

XAU/USD stands at $3,274 after a day high of $3,328. A trade agreement between the US and China was announced, effectively ending their “trade war”. The potential resolution of the Israel–Gaza conflict within weeks also contributes to market optimism.

Inflation and Rate Cuts

US core Personal Consumption Expenditures Price Index met estimates but didn’t reflect disinflation progress. Minneapolis Fed’s Neel Kashkari anticipates two rate cuts in 2025 despite mixed inflation signals.

Trade deals with countries like South Korea, Vietnam, and the EU are embraced positively. Core PCE rose by 2.7% YoY, slightly above estimates. Consumer Sentiment improved moderately according to the University of Michigan, although future inflation expectations were revised downward.

The US Dollar Index is stable and money markets now price in 63.5 bps of easing by year-end. Gold faces a potential short-term decline if it remains below the 50-day Simple Moving Average, with resistance levels at $3,300 and $3,323.

With geopolitical heat appearing to cool and equity markets showing a bit more appetite, gold has taken a step back. Risk assets have caught their footing, loosening the grip that gold usually maintains during uncertain periods. We are watching the impact of stronger diplomatic signals—particularly the agreement over trade between two of the world’s economic titans—as they ripple through safe-haven flows.

XAU/USD currently trades at $3,274, having previously pushed to a high of $3,328. That recent spike didn’t hold, which now introduces near-term vulnerabilities. While there’s a habit of retracing from local highs, the broader directional cues suggest that we may not see a strong push to retest that zone again unless fresh uncertainty hits.

Global Economic Collaboration

A handful of new bilateral agreements, including those involving Vietnam and South Korea, have infused a sense of global economic collaboration. This has had the effect of briefly dulling the appeal of defensive positions. Put differently, with lower perceived risk, the case for holding gold purely as a hedge becomes weaker on paper. At the same time, measures of household confidence from Michigan come in slightly improved. It’s not stirring, but enough to further cast doubt over whether the current inflation track warrants urgent monetary reversal.

Kashkari, in a rare dose of direct timing, pointed to two rate cuts next year. While not an immediate pivot, it adds yet another variable to the rate expectations running through fixed income desks. The mixed readings on inflation are still a point of friction—core PCE rose 2.7% on a year-over-year basis, just a notch above forecasts. That suggests policy silence, not loosening, for now.

Options players and futures markets are lining up behind this with a recalibration of yield assumptions. Money markets have adjusted expectations accordingly, now pricing in about 63.5 basis points of total easing over the coming months. This affects internal rate models, which in turn narrows the upside argument for gold unless event risk returns suddenly.

From a technical point of view, the price of gold is teetering beneath the 50-day SMA. If that line continues to hold, short bets may gather traction. There’s resistance at both the $3,300 and $3,323 markers, and those zones are increasingly looking like ceilings in the near term. Should price momentum falter here, we expect a lean towards trimming long positions, or initiating fresh shorts in anticipation of a test closer to the $3,250 region.

We’ve seen this before: gold underperforms when traders begin to bet on growth and stability. That’s not to say long exposure should be entirely abandoned, but portfolios weighted heavily toward metals may find better balance if guided by momentum rather than assumptions. Interest-rate sensitive assets are dictating the tempo right now. As it stands, without a jolt from geopolitics or a stumble in US economic data, gravity may continue to press on bullion.

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