Gold (XAUUSD) Price Forecast: Drops 2% as Dollar Strengthens and Trade Tensions Ease

Gold Prices Dip as US-China Trade Tensions Ease and Dollar Strengthens

Gold prices fell sharply on Friday, dropping 2% and heading for a weekly loss, as easing U.S.-China trade tensions and a stronger dollar pressured the metal. Reports that Beijing has begun exempting some U.S. goods from its 125% tariffs sparked optimism over a potential trade thaw, weighing heavily on safe-haven assets like gold.

On Friday, XAU/USD settled at $3319.34, down $29.64 or -0.89%.

China’s Tariff Easing Weighs on Gold Prices

China’s move to grant tariff exemptions on select U.S. imports signaled a softening in its trade stance. Businesses have been asked to identify critical goods that should be spared, including pharmaceuticals, aerospace parts, and microchips. Analysts view this as an important step towards de-escalation, reducing fears of prolonged global trade disruption. While positive for the global economy, such easing often pressures gold as safe-haven demand diminishes and investors shift into riskier assets.

Dollar Strength Adds to Gold’s Downside Pressure

The U.S. dollar recorded its first weekly gain since March, rising roughly 0.3% against a basket of currencies. Strength in the dollar typically makes gold more expensive for holders of other currencies, reducing demand. The dollar’s uptick was fueled by optimism over U.S.-China trade talks and firmer risk appetite, further driving gold prices lower. Still, some analysts caution that underlying uncertainties could sustain gold demand in the medium term.

Bond Yields Drop as Traders Eye Trade Developments

U.S. Treasury yields slipped, with the 10-year yield falling to 4.258%, reflecting cautious optimism about trade discussions. Despite softer comments from U.S. President Donald Trump and some concessions from China, traders remain wary about the depth of any agreement. Trump indicated that tariffs would not be removed unless the U.S. gained significant concessions, keeping market sentiment cautious and limiting a full risk-on move.

Gold Prices Forecast Remain Cautious Despite Short-Term Dip

While gold prices are under immediate pressure from improving trade sentiment and a stronger dollar, the broader outlook remains cautious. The lack of firm details on any U.S.-China deal, ongoing concerns about global economic growth, and strong central bank gold buying continue to underpin longer-term support for bullion. As long as uncertainty around a comprehensive trade resolution persists, dips in gold prices are likely to be viewed as buying opportunities by traders.

Technically, the main trend is up according to the daily swing chart, however, momentum has shifted to the downside, following the confirmation of Tuesday’s daily closing price reversal top.

Near-term resistance is the minor pivot at $3380.20 and short-term retracement zone support is $3228.38 to $3164.23. The major support and trend indicator is the 50-day moving average at $3050.20.

More Information in our Economic Calendar.