Gold struggles to gather upside traction despite trade fears
- Renewed US-China trade tensions have so far failed to put a strong bid under gold.
- The yellow metal may rise sharply if the Dollar Index breaches key support.
Gold is having a tough time building momentum above $1,280 for the second day despite Trump's tariff threat.
The yellow metal is currently trading at $1,282 per Oz, representing marginal gains on the day. Prices clocked a high of $1,285 on Monday but ended in $1,281 even though the global stock markets cratered on renewed fears of a full-blown US-China trade war.
Trump tweeted Sunday that he would raise tariffs on $200 billion worth of Chinese goods from the current 10% to 25% on Friday and added further that he would "shortly" impose 25% tariffs on the $325 billion in Chinese goods.
In response, Asian stocks gapped lower on Monday with the futures on the Dow Jones Industrial Average (DJIA) falling 500 points. The US stocks, however, recovered a major portion of their losses by day's end. For instance, the DJIA closed with just a 0.25 % loss.
As a result, gold fell back from $1,285 to $1,281 and is currently struggling to pick up a strong bid. The recovery in US stocks and gold's inability to rally hard indicates the markets are still optimistic that the US and China will strike a trade deal.
That said, the upside in the yellow metal will likely gather traction if the Dollar Index falls below 97.41, strengthening the negative bias put forward by the big bearish outside day (engulfing) candle created on May 3. As of writing, the Dollar Index is trading at 97.45.
Gold pivot points
Author
Omkar Godbole
FXStreet Contributor
Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.
