Gold Price Talking Points:
- Given recent technical observations about the gold price rally being overextended and facing exhaustion, the turn in sentiment around US-led trade wars is arriving at just the right time.
- Relaxation in tensions between the US and Mexico after the tariffs were avoided is helping provoke a rebound in risky assets - reducing gold's appeal as a safe haven.
- The pause in the gold rally has created the conditions for a pullback, per retail trader positioning.
A surprising turn of events after the close on Friday precipitated significant gaps in prices when markets opened this week, gold prices included. US President Donald Trump announcing that the Mexico tariffs would be “suspended indefinitely” after an agreement regarding immigration and the southern border was reached between the two countries.
The gains by US equities, US Treasury yields, and the US Dollar – in aggregate reflecting market participants’ collective belief that the odds of a sharp slowdown to the US economy and thus three rate cuts over the next year have dropped, per Fed funds futures – make for a difficult environment for gold prices at the start of the week.
Two Major Drivers of Gold Prices Taking a Breather
There have been two significant drivers of gold price action over the past month, with the former feeding into the latter: developments around US-led trade wars; and the ensuing speculation around the timing