Gold prices recorded a relatively clear correction yesterday after approaching the key psychological level around $3,400/oz.
This is the highest price zone in several weeks and also a level that has historically seen strong profit-taking pressure.
The inability to sustain the upward momentum at this level indicates that the market is temporarily entering a technical correction phase, as bullish sentiment is replaced by caution.
The main reason for the correction primarily stems from a shift in investor risk expectations. Specifically, the phone call between U.S. President Donald Trump and Chinese President Xi Jinping has somewhat eased concerns about a potential resurgence of the trade war.
This had previously been a factor driving strong gains in gold, as capital sought a safe haven amid global instability.
According to Xinhua and Reuters, the call lasted more than an hour and focused on key economic issues, including trade, supply chains, and the Taiwan issue. Although no breakthrough was achieved, both sides showed a conciliatory tone and pledged to continue negotiations. The market reacted positively to this news, with capital tending to shift away from defensive assets like gold and back into equities and bonds.
In addition to geopolitical factors, gold’s price movement this week has also been heavily influenced by a series of mixed economic data from the U.S. The ADP data disappointed with only 37,000 new jobs, the lowest since early 2023. Meanwhile, both the ISM Manufacturing PMI and ISM Services PMI weakened, particularly with the services index falling below the 50 thresholds, signaling contraction in this key sector. However, the Services PMI released by S&P Global was more positive, creating a mixed picture.
These data points are causing diverging expectations regarding the U.S. growth and inflation outlook. If growth continues to weaken while price pressures ease, the Fed’s rate-cutting path in the second half of the year will become clearer. This would be a medium-term supportive factor for gold. However, if upcoming data—especially tonight’s Non-Farm Payrolls (NFP) and unemployment rate—shows that the labor market remains stable, the Fed may continue to hold a hawkish stance, thereby putting renewed pressure on gold.
In the short term, gold is likely to continue correcting or consolidating as the market awaits new signals. The strong upward momentum in gold in the recent period was largely driven by uncertainty and expectations of rate cuts, but both of these factors are currently in a state of temporary equilibrium.
However, in the medium and long term, gold’s trend still has a positive foundation. Global risks, particularly U.S.-China trade tensions, have not been fully resolved, as the recent phone call was merely a “temporary de-escalation” without any concrete commitments. Moreover, if upcoming data confirms a weakening U.S. economy, the Fed could pivot toward easing, thereby supporting gold prices. Finally, institutional capital continues to show interest in gold as a defensive tool amid geopolitical instability and lingering inflation.
Given these conditions, the current correction in gold should be seen as a temporary accumulation phase rather than a trend reversal. Price action in the coming sessions, especially after the release of the Non-Farm Payrolls (NFP) data, will be the key factor in determining whether gold has sufficient basis to enter a new upward cycle.
