Gold (XAU/USD) Forecast: Gold faces headwinds as risk appetite improves

• Gold prices decline as US-China trade deal hopes rise, impacting safe-haven demand.
• US GDP contracts in Q1 2025, but tariff developments overshadow data releases.
• Key support levels for Gold (XAU/USD) are identified as bearish pressure builds, with 3200 and 3167 being crucial

Gold prices have slipped below two crucial areas of support as hopes of a trade deal between the US-China continues to grow. The precious metal is now trading near a two-week low.

Risk appetite and sentiment continues to improve on rising hopes that a trade deal between the US-China will be reached. According to reports from both Bloomberg and the Financial Times, the Trump administration has reportedly tried reaching out to Beijing to start tariff talks, according to a Chinese state-run media outlet.

The outlet stated that China isn’t in a rush to negotiate and won’t engage unless the US takes meaningful actions. However, it added that there’s no harm for China in talking if the US wants to. Analysts noted this language shows a softer stance from Beijing compared to last week, when China’s commerce ministry said negotiations couldn’t begin until the US removed its heavy tariffs.

The result of this growing optimism has definitely weighed on safe haven demand and thus pushed Gold prices lower.

The U.S. economy shrank by 0.3% in the first quarter of 2025, its first decline since early 2022. This was a sharp drop from 2.4% growth in the previous quarter and missed market predictions of 0.3% growth.

A 41.3% jump in imports played a big role in slowing the economy, as businesses and consumers stocked up on goods ahead of higher costs from new tariffs announced by the Trump administration. Consumer spending grew just 1.8%, its slowest pace since mid-2023, and federal government spending fell by 5.1%, the biggest drop since early 2022. However, fixed investment rose by 7.8%, the largest increase since mid-2023.

The impact saw the US Dollar weaken as recession fears gained momentum. Gold prices also enjoyed a rally but as we have noted of late, tariff developments will overshadow data releases in the short-term.

Gold failed to hold onto gains and experienced a swift selloff in the Asian session as it failed to consolidate gains above the $3300/oz handle.

There remains a significant amount of high impact data releases for the US this week, with the NFP release tomorrow taking center stage.

Even if the data disappoints, the chances of a stellar Gold recovery may not be forthcoming. As long as sentiment and risk appetite continues to improve Gold bulls will face significant headwinds.

From a technical analysis standpoint, Gold prices have failed to hold above crucial support at the $3300/oz handle.

A daily candle close below the 3300 handle yesterday has led to an accelerated selloff in the Asian session. This has continued after the European open with the precious metal trading at 3220 at the time of writing.

Looking at the period-14 RSI and it is approaching the neutral 50 level which could prove key. A bounce here could be a sign that bullish momentum remains intact and thus facilitate a short-term recovery.

The precious metal is down around $60 on the day and yet a push toward support at the 3200 handle looks likely.

A crucial level of support i will be keeping an eye on rests at 3167, which was the April 3 swing high, just after the universal tariff announcements. This level could hold the key, and have a big impact on whether the precious metal is able to hold above the crucial 3000 handle.

Gold (XAU/USD) Daily Chart, May 1, 2025

Support

• 3195
• 3167
• 3150

Resistance

• 3250
• 3300
• 3325

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