Gold prices came under renewed pressure on Thursday as sentiment improved after a trade deal between the US and Japan earlier this week.
Following the US-Japan trade deal, hopes for a similar negotiation between Washington and the European Union also increased.
A deal between the US and EU could include a 15% American baseline tariff on EU goods and exemptions.
After experiencing significant gains on Tuesday, with prices rallying above $3,400 to reach a five-week high, gold prices fell well below the $3,400 per ounce mark.
“The decline in safe-haven demand prompted gold to surrender all of yesterday’s (Wednesday) gains while extending losses further,” Gary Wagner, technical market analyst at Kitco.com, said in a report.
This decline pushed prices below the significant 23% Fibonacci retracement level at approximately $3,410, calculated from the April 7th low near $3,000 to the all-time intraday high above $3,500.
At the time of writing, the gold price on COMEX was at $3,370.90 per ounce, down 0.7% from the previous close.
Source: Kitco
US-Japan trade deal
On Wednesday, US President Donald Trump unveiled a significant agreement with Japan.
This deal slashes the reciprocal tariff on Japanese goods to 15% from the initial 25%.
Furthermore, it includes a commitment of $550 billion in Japanese investment for the US economy, and significantly expands access for American agricultural and automotive exports to the Japanese market.
“This agreement has calmed some immediate trade concerns. As a result, short-term safe-haven flows into gold have declined,” Muhammad Umair, financial markets analyst at FXStreet, said in a note.
According to experts, although the trade deal between the US and Japan was a relief for equity markets, significant uncertainties remain with other trading partners.
The most pressing concern remains the European Union, which has already prepared retaliatory measures, including a 30% tariff, should negotiations fail.
Currency movements
The immediate market response to the announcement of the trade deal between the US and Japan produced complex movements in currencies.
Despite an initial strengthening of the dollar due to reports of a US-Japan agreement, later developments created challenges for the currency.
The euro gained strength against the dollar due to improved prospects for a potential trade deal with the EU, which consequently put downward pressure on the dollar.
Meanwhile, US existing home sales unexpectedly dropped to a nine-month low, adding to market weakness.
“These combined factors resulted in the dollar trading down 0.19% at 97.21, marking the fourth consecutive session of declines,” Wagner said.
“Despite this dollar weakness, which typically supports gold prices, the precious metal failed to benefit from the currency’s retreat.”
Overall bullishness: road towards $4,000
According to FXStreet’s Umair, gold prices have finally broken out after spending several years consolidating within a wedge pattern.
Umair said:
This breakout above the $2,075 resistance marked a significant shift in market momentum.
After the breakout, prices started to rise within an Ascending Broadening Wedge, indicating robust buying interest and heightened market volatility, he added.
Gold’s support levels have shown consistent upward movement, with key floors now established at $2,790 and $3,000.
The precious metal has reliably stayed above these points, underscoring its technical strength.
Source: FXStreet
Currently trading around $3,380, gold briefly touched $3,500, an initial target within its wedge pattern in April. This price action indicates that gold is forming a base for its next ascent.
“The overall chart pattern points to a potential upside target in the $3,800–$4,000 range. This projection aligns with the upper boundary of the broadening wedge,” Umair added.
He believes gold prices could target the $4,000 per ounce level once the $3,500 mark is breached comprehensively in the near future.
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