Gold pulls back on tariff truce, but deep macro risks remain

Gold prices edged lower on Monday as markets reacted to a temporary customs truce and mild profit-taking, following President Donald Trump's announcement that the proposed 50% tariffs on the European Union would be postponed until July 9. This decision opened a window for renewed negotiations between Washington and Brussels, reducing the immediate appeal of gold as a safe-haven asset—especially after the yellow metal posted its strongest weekly gain in over six weeks.

Spot gold dropped 0.8% to $3,332.04 per ounce, while U.S. gold futures fell 1% to $3,331.90 by 12:50 GMT.

Technical breather, not a trend shift

Analysts largely interpret this pullback as a technical pause rather than a shift in trend, after a strong rally fueled by geopolitical tensions and evolving U.S. monetary policy. UBS analyst Giovanni Staunovo noted that the market remains range-bound and that thin liquidity, due to the U.S. Memorial Day holiday, contributed to reduced momentum.

"We still expect gold’s uptrend to continue in the coming months, with a potential retest of $3,500 per ounce amid persistent underlying risks," he added.

Macro factors still supportive

While immediate trade tensions have eased, the broader macroeconomic environment continues to support gold prices:

• Growing concern over the widening U.S. federal deficit, especially after Trump's major tax cuts and spending package.
• Recent U.S. inflation data came in softer than expected, both on the consumer and producer levels.
• Markets are increasingly pricing in at least two rate cuts by the Federal Reserve during 2025.
• A weaker U.S. dollar, which hit its lowest level in over a month, adds to gold’s attractiveness as a dollar-denominated asset.

Strong demand from Asia and China

On the demand side, official data showed that China’s gold imports via Hong Kong doubled in April, reaching their highest level since March 2024. This underscores strong ongoing demand from Asian consumers, who remain a key pillar in long-term gold support.

Major institutions still bullish

Adding fuel to the bullish outlook, Citigroup revised its 3-month gold forecast upward to $3,500 from $3,150, citing three main factors:

• Political and fiscal instability in the U.S.
• Escalating geopolitical tensions
• Robust demand from emerging markets

Geopolitical risks persist behind the scenes

Even as U.S.-EU tariff tensions cool temporarily, other global flashpoints remain active:

• Russia launched its third consecutive airstrike on Ukrainian cities in what’s seen as the largest escalation since the war began.
• Ongoing Israeli air raids on Gaza have raised concerns about broader Middle East instability.
• Trump condemned the Russian aggression and threatened new sanctions, bringing political risk back to the forefront.

Key events to watch this week

Investors are now focused on:

• FOMC minutes (Wednesday)
• U.S. Durable Goods Orders
• Preliminary GDP data (Thursday)
• Core PCE Price Index (Friday)

These data points will be crucial in shaping expectations for Fed policy, which in turn could heavily influence gold and the U.S. dollar's trajectories.

Technical outlook: Support at $3,325, resistance at $3,366 and $3,400

Technically, gold remains in a limited corrective phase. As long as it holds above the ascending trendline support at $3,325, the bias remains bullish. A break below $3,324 could open the door to $3,300 and then $3,283.

On the upside, clearing Friday’s high at $3,366 could pave the way toward $3,400 and potentially $3,430. The long-term target remains the all-time high near $3,500, with interim resistance at $3,470.

Conclusion

While the tariff truce may have offered temporary relief, the underlying macro and geopolitical uncertainty persists. Gold may be catching its breath, but strong structural drivers continue to support the upside potential—unless upcoming data or the Fed deliver unexpected surprises.