- XAU/USD is currently trading in the vicinity of $3,180, poised to conclude the week with a loss exceeding 4%.
- The moderation of trade disputes and a relatively calm geopolitical environment are diminishing the allure of the precious metal.
- The price has retreated by more than $300 from its peak in April, which reached an all-time high of $3,500.
Gold (XAU/USD) is extending its downward trajectory on Friday, approaching the $3,180 level and on pace to record a substantial weekly decline of over 4%, the most significant since November 2024. The price of the yellow metal has now decreased by more than $300 from its historical high of $3,500, achieved in April, as the demand for safe-haven assets wanes and technical selling pressure intensifies. Market analysts are closely watching key support levels, as a breach could trigger further downside momentum.
Investor risk appetite has strengthened this week following indications that the United States and China have reached an agreement to de-escalate trade tensions over the next 90 days. Concurrently, geopolitical risks have remained subdued, with tensions between India and Pakistan and in the Middle East showing signs of stabilization. Furthermore, after a prolonged period of conflicting statements and diplomatic impasse, Ukrainian and Russian representatives have initiated direct negotiations for the first time since 2022, potentially easing concerns about regional instability.
Recent macroeconomic data revealed that the preliminary University of Michigan Consumer Sentiment Index for May experienced a notable decrease, falling to 50.8 from 52.2 in April, significantly underperforming consensus estimates of 53.4. This decline underscores increasing apprehension among households regarding persistent inflationary pressures and broader economic uncertainties. The Federal Reserve’s monetary policy outlook remains a key factor influencing market sentiment, with investors closely monitoring inflation data and Fed communications for signals regarding future interest rate adjustments. While weaker consumer sentiment would typically bolster gold’s safe-haven appeal, the market’s reaction has been muted, with traders primarily focused on profit-taking activities and adjusting their technical positions. The upcoming release of the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, will be crucial in shaping market expectations for future monetary policy decisions.
