Quick overview

Gold up on Monday after brutal week as investors flee to safe havens amid US trade tensions and Moody’s downgrade. Dollar index (DXY) down 0.3% making gold cheaper for international buyers.

The spark? Two things. First, Moody’s downgraded the US sovereign credit rating by one notch on Friday citing growing concerns over US debt. Second, Treasury Secretary Scott Bessent said countries that don’t negotiate in “good faith” will get hit with Trump’s tariffs.

KCM Trade’s Chief Market Analyst Tim Waterer said:

“The downgrade and risk-off tone has given gold new life.”

Gold fell 2% on Friday, its worst week since November as US-China trade truce boosted risk appetite. Now that optimism is fading and volatility is back gold is back in play.

Gold and the Fed: Will Trade Policy Change the Timeline?

Gold loves uncertainty—and right now there’s plenty of that. Trump’s return to tariff threats could bring back the kind of market stress we saw during his first term when trade wars rocked global supply chains.

Meanwhile US inflation data last week was mixed:

• Producer prices (April): Unexpected decline

• Retail sales: Slower than expected

• Consumer prices: Below forecast

All of which points to rate cuts sooner rather than later. “We could see a Fed cut by July or September,” Waterer said. “A lot depends on how these trade talks go.”

Gold is strongest in a falling rate environment where opportunity costs are lower for holding non-yielding assets.

Gold Price Forecast: Levels to Watch This Week

From a technical perspective gold (XAU/USD) is stuck in a descending channel on the 2-hour chart currently at $3,216. It has failed three times to break above the channel resistance and the 50-period EMA at $3,221.

Notable signals:

• Shooting star candle near resistance suggests fading buying pressure.

• MACD histogram is weakening

• Channel still in play with lower highs and lower lows.

Trade:

• Short: If price gets rejected at $3,221

  • Targets: $3,168 and $3,123

• Breakout Buy: Above $3,228 with strong candle

  • Stop-loss: Outside the channel

Think of the chart like a slanted tunnel. Unless gold goes through $3,228 it’s more likely to go down than up.

ABOUT THE AUTHOR See More

Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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