Spot gold traded at around $3,239 per ounce in early Asian hours on Wednesday, after a modest recovery on Tuesday that saw prices close 0.46% higher at $3,249.90/oz. The rebound came after a more than 2.7% drop on Monday but may be short-lived, according to analysts.
Christian Borjon Valencia of FXStreet noted that Tuesday’s rally was driven by dip-buying following weaker-than-expected U.S. inflation data. However, renewed optimism surrounding U.S.-China trade talks may be limiting further upside, with gold struggling to break above $3,300/oz.
The U.S. Labor Department reported a 0.2% month-on-month increase in consumer prices in April, falling short of the 0.3% forecast. While the softer data eased near-term inflation concerns, analysts cautioned that recently announced tariff reductions between the U.S. and China could gradually lift commodity prices again.
In Geneva over the weekend, Washington and Beijing agreed to a 90-day pause in tariff escalations. The U.S. committed to lowering tariffs on Chinese goods from 145% to 30%, while China pledged to cut its duties on U.S. imports from 125% to 10%. The temporary truce has eased market tensions but could weigh on safe-haven demand for gold.
Gold has reached record highs this year, buoyed by aggressive central bank purchases, geopolitical risks, and strong ETF inflows, all exacerbated by the earlier wave of U.S. tariffs that stoked recession fears.
From a technical perspective, Valencia pointed to a potential “double top” formation emerging on the daily gold chart. This pattern suggests the rally may be nearing exhaustion. If prices fall below the May 1 low of $3,202/oz, it could confirm the bearish setup. Subsequent downside targets would be $3,100/oz, followed by $3,000/oz, with $2,950/oz seen as the minimum support level.
Conversely, a breakout above $3,300/oz would shift attention to resistance at $3,350/oz, and potentially $3,400/oz if momentum builds.
As of 09:02 GMT Wednesday, spot gold was trading at $3,239.32/oz.
