Gold prices have seen a downward correction after impressive gains last week, starting this week with a bearish gap. Having touched a new record high of $3,245, XAU/USD entered a consolidation phase, dropping to $3,200 and trading at $3,208 with a 1% daily loss.
A risk-positive market sentiment emerged as the US announced exemptions on tariffs for electronic devices, providing relief despite the ongoing trade tensions with China. China’s decision to raise tariffs on US imports to 125% fueled previous gains in gold, but the market sentiment improved, leading to increased futures for US stocks by 1.1% to 2%.
New Trade Policies Announced
US Commerce Secretary disclosed that additional levies on technology imports and semiconductors will be imposed in the near future. With no major economic data releases expected in the US, attention will turn to Fed officials’ comments and future trade policy announcements.
Gold is regarded as a historical store of value and safe-haven asset, often bought by central banks to diversify reserves. It shows an inverse correlation with US Dollar and Treasuries, frequently rising with geopolitical instability or weakening Dollar, while benefiting from lower interest rates.
The initial part of the article outlines a short-term downturn in gold prices, following last week’s sharp rise which led to an all-time high just above $3,240 per ounce. Gold opened this week lower than it closed last Friday, creating what’s known as a bearish gap. Such gaps often suggest a sudden change in trader sentiment or global risk appetite.
The recent strength in gold was largely tied to concerns over global trade tensions, with the focus squarely on China’s decision to sharply increase tariffs on US goods. This added tension helped support demand for assets historically perceived as safe in uncertain times. That changed at the beginning of this week, with an apparent shift in risk sentiment following tariff exemptions from the US on certain tech products. Investors perceived this development as a sign of cooling pressures.
US stock futures then climbed—between 1.1% to 2%—on the back of the tariff relief. This rise in equities tends to reduce safe-haven demand like gold’s, and naturally contributes to its retracement. That’s what led to the step back from the highs.
Impact of Future Policy Announcements
Despite a brief tone of relief, there’s little indication that trade tensions are fading in any lasting way. Quite the opposite. Raimondo, leading the US Commerce Department, revealed that new duties on tech imports, particularly those in the semiconductor space, are on the horizon. These fresh trade barriers will likely affect risk sentiment again once fully priced in.
At present, the absence of major US economic data releases means that attention this week remains squarely on comments by central bank officials, particularly those tied to potential shifts in US monetary policy. Forward guidance from policymakers, especially when it contradicts previous expectations, often causes outsized reactions in interest rate-sensitive assets like gold.
By its nature, gold tends to react inversely to the strength of both the Dollar and bond yields. If expectations turn toward lower interest rates, or the US Dollar begins to slip due to soft policy measures or weaker-than-expected data, gold is usually a direct beneficiary. That said, in risk-on environments—where equities rally and safe assets fall out of favour—even these tailwinds sometimes struggle to lift prices.
A calm data calendar implies that market participants this week must weigh commentary from central banks more heavily, without relying on fresh macro data to anchor expectations. This makes overall sentiment, driven by softer signals and cross-asset movement, even more influential than usual.
Given everything, the recent pullback in gold may not signal a trend reversal so much as a re-evaluation of positioning, particularly after last week’s sharp upside move. We’ll continue monitoring policy announcements carefully, as even marginal shifts can prompt swift changes in momentum. For now, with gold consolidating just above the $3,200 mark, price volatility could pick up once a more definitive stance is taken by central banks.
As derivative traders, we’d be cautious about overly directional exposure in either side of the gold trade just yet. With implied volatility up and data thin, it’s the sort of week where shorter-dated options strategies or carefully hedged directional positions might be more appropriate. The loudest signals, for now, are coming not from the data calendar, but from the microphones of officials and how markets choose to interpret them.
