Gold Market Reaction to Consumer Sentiment Recent US economic data has been disappointing, showing lower-than-expected CPI and PPI numbers along with a rise in Initial Jobless claims. This has led to forecasts suggesting at least two rate cuts from the Fed in 2025. Fed Chair Jerome Powell mentioned that inflation could be volatile due to supply issues, making monetary policy more complex. Gold is experiencing technical pressure, currently trading around $3,180 after failing to stay above $3,200. A bearish double top pattern suggests a potential reversal from April’s highs, with support expected around $3,160–$3,150. The RSI indicates weakening momentum, and unless gold can reclaim $3,250, further declines are anticipated. Market Context and Projections Gold has fallen over 4% this week, a decline not seen since late last year, indicating it’s struggling to attract investors at current prices. After reaching nearly $3,500 in April, gold has seen a drop of more than $300. This decline has been fueled by reduced interest in safe-haven assets and ongoing technical selling. The broader context is becoming more favorable for risk assets. A temporary US-China tariff truce set for three months has reduced global trade uncertainties. Also, eased diplomatic tensions, especially in Asia and the Middle East, lessen the need for investors to hold gold, which is typically sought during uncertain times. Encouragingly, direct talks between Moscow and Kyiv — the first since 2022 — hint at a tentative shift towards engagement. For gold, which usually thrives on pessimism, these developments weaken the supportive narrative from earlier this year. Although sentiment may be improving internationally, US economic signals still show fragility. The University of Michigan’s Consumer Sentiment Index for May dropped sharply to 50.8, falling well below expectations. Traditionally, this drop could boost demand for inflation hedges, but the market’s muted reaction indicates that profit-taking is overshadowing any newfound interest in gold. Recent US economic data has been soft, as both CPI and PPI failed to meet expectations. Added to the rise in jobless claims, this enhances the likelihood of at least two rate cuts in 2025. Powell’s recent comments support this view but also highlight the uncertainty around supply-driven price shocks that the Committee must consider. Normally, this dovish shift on rates would benefit gold. However, the current price action suggests that supply and market positioning are influencing short-term direction. As of Friday, gold is holding around $3,180, struggling to maintain $3,200, which was recently a key level. With that level breached, the double top from April becomes clearer, indicating exhausted momentum. Next, we look to the $3,160–$3,150 area for potential price stabilization. If this zone holds, it may provide short-term relief. The RSI trend also shows diminishing enthusiasm, having dipped below neutral levels. A significant recovery would likely require reclaiming $3,250. In the meantime, implied volatility in precious metals options has lessened, especially in the short-term. This aligns with a market adjusting to softer data and stepping back from extreme positioning. For now, we anticipate tactical selling will lead the market, with buying interest more likely at technical support levels. Moving forward, the market needs less reaction and more structure. Stay flexible with position sizing and keep an eye on global diplomatic developments and upcoming remarks from central banks. The market is responding not just to sentiment and data but also to timing mismatches between expectations and actual actions. Create your live VT Markets account and start trading now.

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