Long-awaited Correction Seems to Have Come to Gold Market
The gold () price pulled back by 1% on Wednesday after reaching a new all-time high of $3,500. The decline followed U.S. President Donald Trump’s softened tone on key economic issues, which reduced the metal’s safe-haven appeal.
Trump softened his earlier threats to dismiss Federal Reserve (Fed) Chair Jerome Powell and expressed renewed optimism about a potential trade deal with China. On Tuesday, he signalled a possible easing of trade tensions, stating that U.S. tariffs of 145% on Chinese imports could be reduced substantially once a deal is reached.
“The sell-off pushed gold into an extremely oversold condition in the short term,” said Kelvin Wong, Senior Market Analyst for Asia Pacific at OANDA.
Despite the pullback, Wong noted that there is ’no sign of bullish exhaustion yet’, suggesting room for further upward movement as prices remain above key support levels.
Earlier today, XAU/USD fell during the Asian and early European trading sessions. Today, investors await U.S. Purchasing Managers’ Index data due at 1:45 p.m. UTC to get fresh clues on the economic situation. Spot gold may retest support at $3,286. A break below could open the way towards $3,000.
Euro Has Pulled Back
The (USD) strengthened against other major currencies on Wednesday. Investors were relieved after U.S. President Donald Trump backed away from threats of firing Federal Reserve (Fed) Chair Jerome Powell.
“I have no intention of firing him,” Trump told reporters in the Oval Office on Tuesday. “I would like to see him be a little more active in terms of his idea to lower interest rates,” he added.
“While it’s still early days, the mood in the market is evidently shifting, and what was a strong ’sell America’ vibe flowing through markets yesterday has in part reversed,” said Chris Weston, head of research at broker Pepperstone.
“Markets are becoming ever more conditioned to the President shooting from the hip and then reversing the stance like it was never a big issue,” Weston commented.
Meanwhile, European Central Bank (ECB) President Christine Lagarde said on Tuesday that she sees no signs of recession in the eurozone. She commented that the disinflation process in the eurozone is on track, and we are close to completion. Thus, there is little chance for an interest in May, especially after the ECB cut interest rates by another 25 basis points last week—the third cut in 2025 and the seventh since the regulator began easing monetary policy last summer.
Japanese Economy Showed Signs of Growth
On Tuesday, the Japanese yen () lost more than 1% against the U.S. dollar (USD) as investors received signals of easing trade tensions between the U.S. and China.
“Even if Japan and the U.S. were to discuss currency rates, there’s really not much the two sides can do. It doesn’t make sense to conduct currency intervention. Rate hikes are also out of the question,” said Hiroyuki Machida, director of Japan FX and commodities sales at ANZ.
Meanwhile, new data from Japan revealed that private sector activity rebounded in April following a decline in March. The Japan Services Purchasing Managers’ Index () rose from 50 in March towards 52.2 in April. Overall, the services sector’s performance in April signalled a cautious return to economic growth.
USD/JPY rose slightly during the Asian and early European trading sessions. Today, apart from tariff-related news, traders should focus on the U.S. S&P and report at 1:45 p.m. UTC. It may shed light on the state of the U.S. labour market, potentially altering investors’ rate-cut expectations and triggering volatility in all USD pairs. Key levels to watch are resistance at 143.200 and support at 140.000.