Gold may see pullback in the near term amid growing signs of easing US-China trade tensions

Gold prices saw a significant pullback at the start of April after reports confirmed that precious metals were excluded from President Trump’s reciprocal tariffs. Additionally, Federal Reserve Chair Jerome Powell adopted a hawkish stance, warning that tariff-driven inflation could dampen economic growth and delay any potential rate cuts. Gold briefly dropped to $2,970 but rebounded strongly, driven by a collapsing U.S. dollar, which fell to a 35-month low of 99.01, and China’s imposition of aggressive 125% retaliatory tariffs. Increased volatility, stemming from Trump’s pharmaceutical tariff threats and China’s ban on Boeing, triggered a global flight to safe-haven assets, pushing gold to record highs.

In April 2025, COMEX gold futures surged over 18% from their monthly low to an all-time high of more than $3,509 per ounce in late April. However, the rally lost momentum in the final week as gold prices corrected sharply to below $3,210 amid easing geopolitical tensions and a rebound in the U.S. dollar. Despite this late pullback, COMEX gold closed April with a 4.5% gain, marking its fourth consecutive monthly rise, driven by trade unrest, erratic U.S. policy announcements, ongoing geopolitical tensions, and growing recession concerns. MCX gold futures also rose over 14.5% from April lows but ended 5% higher for the month after retreating from all-time highs of ₹99,558 per 10 grams to around ₹94,600.

Gold prices faced another setback in the second week of May, hovering near a one-month low, weighed down by improved global risk sentiment and reduced safe-haven demand following significant progress in U.S.-China trade negotiations. Both nations agreed to temporarily lower tariffs on each other’s goods for 90 days, with the U.S. reducing the combined tariff rate on Chinese imports to 30% from 145%, and China lowering its levies on U.S. imports to 10% from 125%. This development prompted investors to shift away from safe-haven assets, putting downward pressure on gold. Additionally, the Federal Reserve’s hawkish comments added to the bearish momentum. Chair Jerome Powell highlighted rising inflationary pressures and risks in the labor market, ruling out any preemptive rate cuts due to trade-related uncertainties.

Gold is currently trading near $3,230 per ounce as expectations for Fed rate cuts have been pushed back to September despite a softer-than-expected U.S. CPI reading for April (with monthly inflation at 0.2%, compared to the forecasted 0.3%). Markets are now pricing in only 50 basis points of easing this year, with a 50% probability of a 25 basis point cut in September, which could limit gold’s upside. Additionally, investor sentiment has moderated in response to the temporary U.S.-China truce and potential de-escalation of the Russia-Ukraine conflict. Hedge funds have begun unwinding long positions, with CFTC data showing net long futures and options at a 14-month low. A stronger dollar and higher Treasury yields have also weighed on bullion. Further signs of easing U.S.-China trade tensions, following the U.S. announcement of plans to lower the "de minimis" tariff threshold for low-value Chinese shipments to 30%, are likely to keep gold prices under pressure in the near term. Despite near-term volatility, long-term fundamentals, such as stagflation risks, potential recession, a widening U.S. deficit, and strong central bank buying, remain supportive for gold.

Technically, COMEX gold has key support at $3,170, with a broader demand zone between $3,050–$3,090. A breakdown below $3,050 could expose $2,900. On the upside, sustained strength above $3,320 and a breakout beyond $3,450 could target $3,700. On MCX, ₹91,500 is crucial support, with resistance at ₹94,800 and ₹97,900, beyond which gold could rally towards ₹1,03,800.

COMEX silver futures settled 5% lower in April, near $32.80 per ounce, despite recovering over 19% from an eight-month low of $27.50. Early in the month, prices dropped more than 16% as investors reacted to Trump's aggressive tariff rhetoric, fueling fears of a global trade war and a potential hit to industrial demand. However, sentiment improved after Trump announced a 90-day tariff pause and indicated willingness for trade negotiations with important trade partners, which eased some trade concerns. Safe-haven flows continued amid political uncertainty, weak U.S. economic data, and expectations of Fed rate cuts.

COMEX silver futures have been trading in a narrow range of $31.8–$33.5 per ounce so far in May, following a 5% decline in April despite a strong 19% rebound from an eight-month low of $27.50. Currently, Comex silver trades below $33 per ounce, awaiting a clear directional cue as recent U.S.-China agreement to reduce tariffs to 10% and 30% for 90 days has eased short-term concerns, supporting the outlook for silver’s industrial demand, especially in renewables. Still, uncertainty beyond the 90-day window and cautious investor sentiment may limit upside potential in the near term.

Views are personal. The author is AVP - Commodity Research, Kotak Securities.