Gold slips below $3,200 on de-escalation of tariff war. Can yellow metal stay strong amid easing US-China trade tensions?

Gold prices in India are hovering around ₹99,775 per 10 grams in Ahmedabad on Monday, trading below by around 1.48% from its all-time high of ₹1,01,275 hit in April.

The MCX gold price stood at ₹96,518 in the previous closing session. International gold prices stand at $3,272.64 per ounce as of 11 pm (IST). After the Federal Reserve reaffirmed that it is not in a rush to cut interest rates since the U.S. economy is only relatively steady and inflationary concerns are high, gold's price action last week was comparatively neutral.

In recent weeks, the greenback has recovered after dropping almost 9% from its March peak and momentarily falling below 98 last month on the dollar index. The US-China trade rhetoric has been cooling, which has been a major factor in the recovery. The announcement of a trade deal between the two nations could augment well for the dollar.

The trade deal may prove to be a huge win for President Donald Trump in his tariff war with Beijing. Trump indicated a readiness to reduce U.S. tariffs on China to 80% going into the weekend trade talks, but it is yet to be clear on the terms of the deal the two countries have arrived at.

"Traders will watch the contents of the US-China trade discussions, which the US will provide on Monday," said Dr Renisha Chainani, Head- Research, Augmont.

In April, the People's Bank of China increased its gold stockpiles by 2 tonnes for the sixth consecutive month, according to the World Gold Council. While the Czech National Bank's reserves rose by 2.5 tonnes in April, the National Bank of Poland's (NBP) holdings jumped by 12 tonnes to 509 tonnes.

"The sellers would be able to regain control, at least temporarily, if tensions were to decrease or some tariffs were to be lowered. Additionally, the fact that gains have now paused twice in the mid-$3,400 (₹Rs 97,000) range suggests that the rally may be nearing its short-term exhaustion. Gold prices may drop to $3,200 (₹Rs 92,000) if they remain below $3,365 (₹Rs 94,000) this week. We are expecting to see a $200 decline from those levels up to $3,000 (₹Rs 86,000) if prices break and hold below $3,200, which is the Double Top formation's neckline support,” Chainani said.