- Gold price snaps losing streaks and reclaims $3,250 after consolidating three consecutive days of losses.
- Gold unwinding takes place after headlines that China is considering trade talks with the US.
- Although sentiment looks to be starting to tilt to the downside, upside risks persist.
Gold (XAU/USD) trades around $3,263 on Friday, recovering from two-week lows after three straight days of losses. The losing streak that took place this week was the sum of a whole package of headlines that all had one theme in common: easing on tariffs. Besides the executive orders United States (US) President Donald Trump had signed this week to give relief to the car sector, the main driver for the turnaround in the Gold rally is news that China is considering to start talking with the Trump administration on a potential trade deal, Bloomberg reports on Friday.
Although the initial market reaction is bearish for Gold with these possible tariff talks getting underway, a quite big tail risk needs to be outlined. The best example is the current ongoing trade talks between Japan and the US, where Japan is the biggest foreign US debt holder by $1,125.9 billion. Japanese Finance Minister Katsunobu Kato said this Friday that the Japanese holdings are a tool for negotiating with the Trump administration, explicitly raising for the first time its leverage as a massive creditor to the United States, Reuters reported.
Daily digest market movers: China and Japan push back
- China’s Commerce Ministry said in a Friday statement that it had noted senior US officials repeatedly expressing their willingness to talk to Beijing about tariffs, and urged officials in Washington to show “sincerity” toward China. “The US has recently sent messages to China through relevant parties, hoping to start talks with China,” the ministry added. “China is currently evaluating this”, Bloomberg reports.
- National Economic Council Director Kevin Hassett said the Trump administration is making progress in tariff talks and expects news by the end of Friday, Reuters reports.
- When looking at US debt holders, with Japan coming in first with $1,125.9 billion in holdings, China comes in second with a total of $784.3 billion, while the total US debt amounts to around $26,025.4 billion.
- The CME FedWatch tool shows the chance of an interest rate cut by the Federal Reserve in May’s meeting stands at 6.4% against a 93.6% probability of no change. The June meeting sees a 57.8% chance of a rate cut. Should the Nonfarm Payrolls release later this Friday fall substantially, rate cut bets for June and even May might see a lift in sentiment, where a substantial upside beat of estimates would mean a further delay in any rate cuts from the Federal Reserve (Fed). Nonfarm Payrolls are expected to be released at 12:30 GMT, with the consensus at 130,000 against the previous 228,000.
- Another chapter in the take-over story with Gold Road Resources Ltd. Shares were suspended from trading in Sydney, with the miner citing “media speculation regarding a potential change of control transaction”. The suspension will be lifted when the market opens on May 6, unless the company issues an announcement before then, the Perth-based miner said in an exchange filing Friday, Bloomberg reports.
Gold Price Technical Analysis: Ballooning tail risk
Although the Gold rally may be stalling and a return to the all-time highs at $3,500 will not happen soon, the tail risk of a shock event is still present.
That comes with possible trade talks starting between China and the US, opening up risk for a full escalation if talks are not going the way they are supposed to. The pressure is not only on for China, where the tariffs are eroding economic growth, but for President Donald Trump as well as he has nothing to show in terms of trade deals after 100-days of turmoil.
The Gold price is currently at a very heavy technical area, with first the daily pivot falling in line with the technical pivotal level from the high of April 11 at $3,245. Very close, the first R1 resistance at $3,254 is already presenting itself. For a solid breakout, $3,332 as R2 resistance is the upside level to look out for and which would deliver confirmation that the three-day losing streak is done.
On the downside, the S1 support is providing a cushion at $3,197 and coincides with Thursday’s low. Further down, the technical pivotal floor near $3,167 (April 3 high) comes into play, advancing the S2 at $3,155.
XAU/USD: Daily Chart
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.