Gold eyes breakout amid renewed trade war tensions
Gold eyes breakout amid renewed trade war tensions
Gold was on the ascendency in the first trading session of June, after ending May flatter than a pancake. Up a cool $60, the metal was finally above a short-term bear trend that had capped the rallies in recent weeks. Except last month, investors have been flocking to the yellow metal for months now, as years of stubborn inflation and mounting debt across developed nations—especially the US and Japan—continue to chip away at confidence in fiat currencies. While a brief spell of trade optimism capped gold’s momentum in May, the tide might be turning again. Trade tensions have returned to the headlines, and with bond markets wobbling, gold could be setting up for another leg higher. The potential for a breakout this week is rising—especially if bond yields in the US and Japan resume climbing for all the wrong reasons.
Gold could take a further boost from market jitters
The S&P 500 wrapped up last week dead flat, but not before Donald Trump threw a curveball after Friday’s close – announcing a plan to double tariffs on steel and aluminium to 50%. This comes right after global equities enjoyed their best month since November 2023, driven by hopes that trade risks had receded. But those hopes might have been premature. June is already shaping up to be a trickier month. The S&P 500 futures and global stock markets were lower on Monday amid renewed trade tensions between China and the US. The world’s two largest economies have accused each other of violating the trade deals. Between fresh trade war fears and looming political fights over tax and spending in the US, there’s plenty for markets to digest. And with the debt ceiling drama simmering in the background, expect volatility to make a comeback. For gold, this backdrop of risk aversion and fiscal uncertainty couldn’t be more favourable.
ECB and US data among key macro highlights
So, gold looks to be back in the spotlight as a potential safe haven, but it’s not just geopolitical risks driving sentiment—macro data is also taking centre stage this week. The European Central Bank is widely expected to deliver a 25-basis-point rate cut on Thursday, June 5. With inflation cooling, this has been in the pipeline for weeks. But traders will be listening closely to Christine Lagarde’s tone during the press conference. Will the ECB hint at more cuts, or take a step back and reassess?
Meanwhile, the US macro calendar is packed. The big one is the non-farm payrolls report for April, set for release on Friday, June 6. Given the Fed’s data-dependent stance, this jobs report could shift expectations. Markets will also be alert to signs that trade uncertainty is starting to weigh on the labour market. Recent softness in consumer sentiment and GDP consumption points in that direction.
Ahead of NFP, we also get JOLTS data and both ISM PMIs—key breadcrumbs that could sway market sentiment and, by extension, influence the gold direction.
Gold technical analysis
Technically speaking, the XAUUSD chart is looking bullish again. The metal has spent the past few weeks consolidating, allowing overbought momentum to cool off across several timeframes. Encouragingly, it has held above key support levels, including the year-to-date bullish trendline and major moving averages. More importantly, price has been repeatedly testing the upper boundary of the consolidation pattern—suggesting a breakout was on the way. Today, it looks like that breakout has finally taken place. Let’s see if the metal will hold the breakout on a daily closing basis above the point of origin of the breakout above $3,320.
Source: TradingView.com
Key levels to watch
Now that the bulls have managed to push gold decisively above the $3,320 resistance, the next upside targets are at $3,360 (already hit), followed by $3,400. A clean break above that opens the door to $3,435 and then the all-time high at $3,500.
Support in the short term sits at point of origin of today’s breakout at $3,320. Below this, the next support is seen between $3,245 and $3,275. Beneath that is the key trendline at $3,200, with the early April high around $3,167 providing additional cushion.
The must-hold level is now at $3,120, the most recent low. A break below that would violate the bullish trend structure and potentially usher in a bearish reversal, potentially paving the way for a drop to $3,000. If the selling accelerates, the longer-term trendline at $2,870 and the 200-day moving average just below that become key watch levels. But we will cross that bridge if we get there. For now, the technical gold path of least resistance is firmly to the upside.
Trader | Analyst | TradingCandles.com
e: Fawad.Razaqzada@TradingCandles.com
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