Gold Price Declines to Near $2,010, Geopolitical Tensions and Market Sentiment Impact Risk-Sensitive Assets

GOLD price (XAU/USD) has fallen significantly to nearly $2,010.00 during the early European trading session. The precious metal will likely face increased selling pressure, potentially finding support near the psychological level of $2,000.00. The negative bias for gold prices has been influenced by geopolitical tensions between the United States and China. China is expressing discomfort regarding US arms support to Taiwan. In response, a Chinese Foreign Ministry spokesperson stated that China would take decisive and effective measures to protect national sovereignty and territorial integrity. This has unnerved market sentiment, impacting risk-sensitive assets.

The US Dollar Index (DXY) is attempting to maintain its position above 102.00, while the 10-year US Treasury yields have dropped below 3.3% again due to expectations that the labor market is no longer extremely tight.

In addition to the softening US labor market, recession concerns have intensified. Slowing economic activities, driven by the Federal Reserve’s (Fed) higher interest rates, are contributing to a potential recession in the US economy.

Although market participants expect a neutral stance from Fed Chair Jerome Powell for May’s monetary policy, Cleveland Fed Bank President Loretta Mester stated in a Bloomberg report that policymakers should raise their benchmark rate above 5% this year and maintain it at restrictive levels for some time to curb inflation.

Gold Technical Analysis

GOLD prices have tested the immediate support level derived from Wednesday’s low at $2,010.88 on an hourly scale. The precious metal has sharply fallen below the 20-period Exponential Moving Average (EMA) at $2,017.18, while the 50-period EMA at $2,011.36 offers some support for gold bulls.

The Relative Strength Index (RSI) (14) has found support near 40.00. A breakdown below this level could trigger bearish momentum.