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Gold prices are back in focus after a period of heightened volatility. Following a sharp 2.65% correction on Monday due to optimism around the US-China trade deal, the yellow metal is showing signs of recovery. Gold (XAU/USD) is showing signs of recovery, supported by rising caution over the lack of clarity in trade negotiations. The global macroeconomic backdrop, central bank policy, and geopolitical risks continue to drive investor interest in safe-haven assets like gold. Let’s explore both fundamental and technical aspects of gold's price action.

Gold Price Boosted by Fed's Stance on Inflation and Trade Deal Uncertainty

Gold’s upward momentum continues to be shaped by uncertainty in global trade dynamics and monetary policy. While the US-China trade deal announcement initially triggered selling pressure, the lack of specifics is keeping traders on edge. Strategists are concerned that the current agreement may not be as impactful as markets hoped. Christopher Wong of OCBC highlights the need for caution, suggesting consolidation between $3,150 and $3,350.

The Federal Reserve’s stance remains cautious as well. Chicago Fed President Austan Goolsbee noted that tariffs, despite easing, still pose an inflationary threat. This means that the Fed might not cut interest rates anytime soon. A recent Deutsche Bank report aligns with this view, indicating that the next rate cut is unlikely before December. Since gold has a negative correlation with interest rates, any delay in monetary easing supports gold prices.

Moreover, global inflation pressures remain persistent. While the easing of tariffs helps ease concerns over a major supply crunch, it does little to address the persistent pressures of underlying inflation. Therefore, the Fed is expected to maintain its current stance longer. This prolongs the appeal of non-yielding assets like gold.

Technical Analysis: Bullish Momentum Continues Despite Recent Correction

The gold chart below shows strong bullish momentum persisting despite the recent correction. The price action is currently moving within an Ascending Broadening Wedge, a pattern typically seen in rising markets with increasing volatility. This pattern began forming in early 2025 and has been respected for months.

Within the wedge, gold broke out of a minor consolidation in mid-April, rallying sharply before pulling back recently. That correction formed a descending channel, which appears to be acting as a bull flag—a bullish continuation pattern.

(Click on image to enlarge)

The lower boundary of the wedge around $3,150 has held firm, signalling strong support. Meanwhile, the upper edge of the flag and the horizontal resistance near $3,300–$3,350 are key breakout zones. If gold breaks above this short-term downtrend, it could retest or even surpass its previous highs.

The candles also show buyers stepping in after each dip, confirming demand. Short-term support lies at $3,215, while a break below that might threaten the wedge's lower trend line. However, the overall structure remains bullish unless a decisive breakdown occurs.

Conclusion

Gold is regaining strength, supported by ongoing uncertainty around the US-China trade deal. Persistent inflation and a cautious Federal Reserve are also boosting demand for the metal. Despite initial selling pressure, the lack of clarity in trade negotiations and delayed rate cuts continue to drive demand for gold as a safe-haven asset. Technically, the metal remains within a bullish Ascending Broadening Wedge pattern, with strong support near $3,150 and key resistance between $3,300 and $3,350. As long as this structure holds and macroeconomic risks persist, the outlook for gold remains positive, with potential for further gains if resistance levels break. 

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