Article by: ETO Markets
Gold prices are currently facing downward pressure, trading around $… as of the May 7th close, as optimism regarding upcoming US-China trade discussions tempers recent bullish momentum. This cautious sentiment prevails ahead of the crucial US Federal Reserve (FOMC) policy decision later today, which is widely expected to hold interest rates steady. Bearish macro factors include the potential for reduced safe-haven demand if US-China trade talks in Switzerland prove fruitful, coupled with a slightly firmer US Dollar as traders position themselves for the FOMC outcome. However, significant underlying support for gold persists due to ongoing geopolitical risks, notably the Russia-Ukraine conflict and tensions in the Middle East. Uncertainty surrounding US tariff policies, with President Trump signalling further tariffs on various imports, also continues to bolster gold's appeal. Strong institutional and central bank buying throughout 2025, driven partly by de-dollarisation trends and significant ETF inflows, further underpins the market. Market sentiment, while reflecting some short-term apprehension, remains broadly optimistic for gold in the longer term, though the immediate focus is squarely on Fed Chair Powell's upcoming commentary for clues on the future interest rate trajectory and its impact on the US Dollar.
From a technical standpoint, Gold (XAU/USD) is showing signs of faltering momentum after its recent rally. The price is now lying at $… on May 7th. The spot price is trading below its Parabolic SAR indicator, currently at $…, which suggests a potential for further bearish movement in the immediate term. On the upside, initial resistance can be observed around the previous day's high of $…(May 6th). A more significant hurdle lies at the all-time high recorded on April 22nd, near $…. For support, the $…-$… zone, a previous breakout area, now acts as the first line of defence. A breach of this level could see sellers test the 10-day Simple Moving Average (SMA) around $…. Should this short-term moving average fail to hold, the next significant support lies at the 20-day SMA, which also corresponds to the middle Bollinger Band, near $…. A break below this crucial $…-$… area would likely negate the near-term positive outlook and could trigger a deeper correction towards the 21-day Exponential Moving Average (EMA) at $…, and subsequently the $…-$… support zone, which aligns with lows seen in late April (e.g., April 25th low around $…).
