Gold prices continued to decline after hitting a high last week, and are now trading below US$3,300.
The decline comes as trade tensions begin to ease and bond markets calm down, drawing investors back to a stronger US dollar.
The precious metal, which hit US$3,366 last week, is now facing short-term challenges amid a volatile global economic environment.
Tariff Delay Eases Pressure, Investors Shift to Riskier Assets
President Donald Trump's decision to delay a 50% tariff hike on European goods from June 1 to July 9 has provided relief to investors. The move has reignited appetite for riskier assets and indirectly affected demand for gold as a hedge.
Bond Market Calm, But Gold Still Can't Take Chances
In addition, news that Japan may reduce long-term bond issuance following a surge in 30-year bond yields also helped stabilize the global bond market.
US Treasury yields also fell sharply, which usually supports gold prices but this time, gold failed to rise again.
On the other hand, gold prices were pressured by hawkish statements from Federal Reserve (Fed) officials and stronger-than-expected US consumer data.
The US Consumer Confidence Index rose to 98.0 in May, supported by some easing in US-China trade tensions.
Minneapolis Fed President Neel Kashkari stressed that interest rates should be kept on hold for now until the inflationary impact of tariffs can be seen more clearly.
Focus Shifts to Fed Minutes and Geopolitical Crisis
Investors are now awaiting the FOMC meeting minutes to be published this week. The market expects a cautious approach from the Fed, with an emphasis on economic data and patience in making any policy changes.
However, geopolitical tensions have not subsided. Russia reportedly launched its largest drone attack on Ukraine since the war began, with more than 355 drones and nine missiles fired over the weekend.
Despite the heightened tensions, gold investors have yet to show much reaction. Trump's warning of possible new sanctions on Moscow has also failed to attract much interest in gold as a hedge.
Technical Outlook: Critical Level of US$3,295 in Focus
From a technical perspective, gold is currently testing a key support area around US$3,295. If this level fails to hold, the risk of further downside could push prices to the next levels of US$3,232 and US$3,217.
For prices to rebound, gold needs to break through the resistance level of US$3,350. If successful, the path is open to the US$3,365 to US$3,375 zone before challenging the key psychological levels of US$3,400 and US$3,435.
SARACEN MARKETS View: In an Uncertain Market, Act Wisely
The downward movement in gold prices reminds investors that global markets are constantly changing and unpredictable. In this situation, traders need to be more careful not only in terms of market direction, but also the right time to enter or exit.
The combination of increasingly complex geopolitics, the direction of Fed policy and the strength of the US dollar will continue to be the main drivers of the gold market in the near term. The US$3,295 level remains an important point that can determine the next direction.
