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Gold prices dropped as market sentiment turned risk-on. Investors responded to comments from U.S. President Donald Trump about potential nuclear talks with Iran and peace efforts in the Middle East. Gold, a traditional haven, saw a drop in demand as optimism returned to the markets. Positive developments in U.S.-China trade relations further reduced safe-haven buying. As a result, gold (XAU/USD) slid to around $3,170.
 

Gold Prices Drop as Geopolitical Risks Ease and Yields Rise

Gold faced heavy selling pressure following U.S. President Trump's remarks in the Middle East. His openness to negotiations with Iran and support for peace in Syria and Yemen led traders to reduce safe-haven positions. Markets saw these statements as signs of easing geopolitical risk.

Trade sentiment between the U.S. and China also improved. China lifted export bans on dual-use items for 28 U.S. companies. This development reduced global uncertainty, weakening the bullish case for gold. Investors also reacted to central bank signals. U.S. yields surged, with the 10-year rate climbing to 4.54%, far above early May levels. This rise made interest-bearing assets more attractive than gold.

Federal Reserve Vice Chair Philip Jefferson's recent comments reinforced the Fed’s readiness to respond to inflation changes. However, Jefferson acknowledged high uncertainty in the inflation outlook, keeping rates elevated. Higher interest rates increase the opportunity cost of holding gold.

Institutional investors also adjusted their positions. First Eagle Investments, managing a $59 billion global fund, reduced its gold exposure. The fund rebalanced into undervalued equities, enhancing returns and reducing concentration risk. This trend reflects a broader move among hedge funds and large investors to cut gold holdings amid improving market conditions.
 

Technical Analysis: Gold Price Forms Bearish Pattern as Wedge Breakdown Comes into Focus

The chart below shows that gold has been trading within an ascending broadening wedge pattern since late 2024. This pattern typically signals increased volatility and eventual breakdowns. After peaking near $3,450, gold entered a descending channel within this larger wedge.

Recent price action shows a series of lower highs and lower lows. This confirms bearish momentum within the short-term channel. Thursday’s candle pushed gold below the midline of the wedge and tested the lower trend line support around $3,170.

This area also aligns with horizontal support levels from March and early April. A sustained break below this zone could lead to further downside. The next key level sits around $3,100, near the wedge’s lower boundary.

Technical indicators suggest weakening bullish momentum. Candlestick formations turned increasingly bearish after failing to break above $3,400. Without a reversal or bounce at current levels, the bearish bias could continue in the near term.

Traders are closely watching if gold breaks the wedge’s support line. A close below this trend line may trigger a steeper correction. On the upside, recovery above $3,250 is needed to regain short-term bullish confidence.
 

Conclusion

Gold remains under pressure as easing geopolitical tensions and improving trade sentiment reduce the demand for safe-haven assets. Rising U.S. yields and a hawkish Fed outlook further weigh on gold by making interest-bearing alternatives more attractive. Institutional investors continue to rebalance portfolios away from gold, adding to the selling momentum. Technically, the break below key support levels signals more downside risk. Unless gold reclaims critical resistance levels, the bearish trend may extend in the near term. 

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