Gold forecast: XAU/USD takes technical bounce but more pain likely near-term

Gold and silver have bounced off their overnight lows, tracking a weaker US dollar. The precious metal didn’t immediately respond to news of a surprise drop in monthly PPI reading, which weighed on the dollar when it was released. In fact, I don’t think macro data for April matters too much, given everyone is now watching whether the US and China will reach a comprehensive trade deal after the two sides slashed their tariffs on each other at the weekend. One other factor that may have helped gold prices today was news Putin wasn’t travelling to meet Trump in Turkey for peace talks, increasing haven demand slightly. All told however, with the recent improvement in risk appetite causing stocks to surge higher, haven demand for gold is not the same as before. The gold forecast is thus not as strong, and we may see a dip to around $3K before dip-buyers step back in.

Gold forecast remains soft despite rebound

With no major bearish headlines dragging stocks down, the mood in markets has shifted decisively upbeat—and that’s bad news for gold. The biggest macro mover right now is a warming in US-China trade relations. Both sides are rolling back tariffs, and negotiations may well be going somewhere. That’s given investors some breathing room. Add to that this week’s softer-than-expected US inflation data, with both CPI and PPI undershooting forecast, and suddenly, worries that Trump’s tariffs might unleash a fresh inflation wave have been reduced, if not completely cooled off. That being said, long-term yields are not coming down much and this is something to keep an eye, which may worry the Fed as well.

Technical levels to watch

Source: TradingView.com

Technically, the price of gold looks vulnerable after making its first lower low and lower high. As I had pointed out the possibility, gold went on to breaks that $3,200 support zone, which is now in the spotlight as potential resistance. In fact, it is the area around $3,193 to $3,216, which may act as a barrier now, after we break cleanly below it. That breakdown initially saw gold dip to a low so far of $3,120. Should the selling resume and we go below that level, then $3,100 is the next objective, followed by $3,022 and maybe even the big psychological level at $3,000.

The long-term trend is still intact, but in the short run the bearish pressure might have a bit more room to run despite today’s bounce from the trend line.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R