- Gold price becomes a falling knife after US and China agree to a major reduction in tariffs for 90 days.
- China will lower its tariffs on US goods to 10% from 125%, while the US will do so to 30% from 145%.
- Safe-haven exodus leads Gold to break vital supports before technically ending the rally.
Gold (XAU/USD) sinks more than 3.0% at the start of the European trading session and heads towards $3,210 at the time of writing as the talks between the US and China have brought some low-hanging fruit for the equity markets. China has agreed to lower its tariffs on the United States (US) to 10% from the initial 125%, while the US will lower its tariffs on China to 30% from 145%, both for 90 days. The announcement caused a risk-on wave in markets, with investors fleeing from safe-haven assets such as Gold.
US President Donald Trump on Friday already hinted at the possibility that the talks could be productive and issued a general message to “buy stocks now” on his Truth Social Network. In this context, Gold has already lost over 8% from its all-time high at $3,500 reached on April 21
Daily digest market movers: US session adds to losses
- The US-China deal to temporarily remove tariffs has sent shockwaves in financial markets: US yields are climbing higher, with the US 10-year yield hitting 4.43%, a level not seen since the beginning of April. Expectations are that a surge in demand on the back of this tariff relief could lead to a spike in inflation.
- In the commodity space, Oil is rocketing higher by more than 2% to $62.50 at the time of writing, as demand is expected to pick up again as trade tensions ease.
- Equities are also surging, with Chinese stocks rallying over 1%. European stock indices see milder gains, while US futures are outperforming with gains between 2.50% and 3%.
- US Treasury Secretary Scott Bessent said that “neither the US nor China wants to decouple” and that he would like to see China open its market more to US goods. A possibility for a purchasing agreement is possible, Bessent went on to say in the statement, Bloomberg reports.
Gold Price Technical Analysis: Get out of the way
Time to roll up your tents and clear the field for the safe-haven outflow avalanche that will likely take place on Monday. Expectations are that a second wave of selling could take place once the US session comes online. It is not unlikely that, with the amassed selling orders, prices could drop below $3,200 soon.
Should this occur, the pressure is on both the S2 support and that technical pivotal level at $3,245 coinciding. Once that level snaps, look for a substantial leg lower, below $3,200, towards $3,167. With that move, nearly all gains from April and May would be erased.
Looking up, a whole list of levels need to be reclaimed in its recovery to retest the all time high at $3,500. First the daily S1 support (which is now a resistance) at $3,284 needs to be achieved. The daily pivot at $3,315 is up next, followed by the R1 resistance around $3,356 and the R2 up next at $3,388.
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.
