Gold (XAUUSD) Price Forecast: Testing Major Retracement Zone as Dollar Surges and Tariff Fears Fade

Bullion Sinks Below Pivot as Trade Tensions Ease and Dollar Gains

Gold prices dropped sharply on Monday, down over 3%, as the metal broke below a key pivot at $3318.50, now acting as resistance. The move came as a response to an agreement between the U.S. and China to reduce reciprocal tariffs, triggering a sell-off in safe-haven assets and a surge in the U.S. dollar.

At 09:29 GMT, XAU/USD is trading $3227.20, down $98.18 or -2.95%.

Tariff Truce Triggers Safe-Haven Unwind

The U.S. and China announced a significant breakthrough in trade talks, agreeing to a 90-day reduction in reciprocal tariffs by 115%, according to U.S. Treasury Secretary Scott Bessent. The development eases trade war concerns that had previously boosted gold. This deal, seen as a de-escalation of recent tensions, led to a sharp unwind in safe-haven positioning, pushing gold to a one-week low.

UBS analyst Giovanni Staunovo noted that this easing of trade-related fears is likely to keep gold under pressure in the near term, although continued economic headwinds may still prompt central banks to accumulate gold on dips. Meanwhile, a strong dollar—up over 1% on the day—further dampened gold’s appeal by making the metal more expensive in non-dollar terms.

Technical Setup Points to Key Support Test

Gold is currently trading near the upper end of its retracement zone, defined by $3228.38 to $3164.23, with the recent bottom at $3201.95. Should downside pressure persist, traders will look to the 50-day moving average at $3137.70 for initial support.

Below this, a break toward $3000–$2956.56 cannot be ruled out. That zone represents the bottom of the intermediate range and aligns with price levels seen before the last major escalation in the U.S.-China tariff dispute.

If buyers are seeking value, they may begin to accumulate positions around the 50-day MA. However, strong-handed sellers could trigger a deeper correction that erases the entire trade war premium built over the past month.

Market Eyes CPI for Fed Clues

Tuesday’s U.S. Consumer Price Index release remains a key event for traders looking for signals on the Federal Reserve’s rate outlook. Softer inflation could reignite Fed cut bets, offering some relief to gold. But in the absence of dovish data, dollar strength and reduced geopolitical risk may continue to weigh on the metal.

Gold Price Outlook: Bearish Near-Term Bias

Given the breakdown below $3318.50 and the shift in risk sentiment following the tariff truce, gold prices are likely to remain under pressure. Unless inflation data or Fed commentary revives demand, the path of least resistance appears lower, with $3137.70 and $3000 as key downside levels in focus.

More Information in our Economic Calendar.