Gold Pulls Back

Gold prices are trading a little lower on Wednesday, pulling back from the weekly highs printed yesterday. Optimism ahead of the US/China trade talks, due to start on Sunday, has seen a weakening of safe-haven demand. However, this optimism is being tempered by rising concerns around a fresh India/Pakistan conflict on the back of India’s missile strikes in Pakistani territory last night with Pakistan threatening retaliation. If tensions there escalate gold prices are likely to fresh safe haven demand, driving prices higher again.

FOMC in Focus

Regarding the current pullback, it’s likely that we’re seeing some long covering too ahead of the FOMC given the expectation that the Fed will push back against rate cut projections. Traders have recently scaled back their dovish forecasts with the market no longer pricing a cut in June, moved to July now instead. If the Fed takes a more a hawkish tone at the FOMC today this could see gold prices coming under heavier selling pressure if USD starts to rally.

US/China Talks on Watch

Additionally, traders will be keeping a close eye on incoming headlines up to the start of US/China negotiations on Sunday. Any positive signs should see gold coming under fresh pressure as safe haven demand weakens further. However, any negative headlines such as a deterioration in tone from either side will cause fresh uncertainty, driving gold higher on rising safe haven demand.

Technical Views

Gold

The rally in gold has stalled for now just ahead of a fresh test of record highs. While the current peak holds, price is at risk of carving out a double top, suggesting risks of a correction lower if 3,254.65 support is broken. While price holds above that level, however,, focus is on a fresh test of highs and an eventual breakout.