Gold prices retreat from record highs as market sentiment shifts on trade war developments.

Gold’s Recent Performance

Gold prices have experienced significant volatility, recently dropping nearly 7% from their record high of $3,500 per ounce. This decline follows renewed optimism surrounding U.S.-China trade relations, which has reduced demand for gold as a safe-haven asset. 

Factors Influencing the Decline

1. Trade War Developments: U.S. Treasury Secretary Scott Bessent’s comments suggesting that the trade war with China is “unsustainable” have fueled hopes for a resolution. 
2. Federal Reserve Stability: President Trump’s assurance that he has no plans to dismiss Federal Reserve Chair Jerome Powell has calmed markets, further reducing gold’s appeal. 
3. Strengthening U.S. Dollar: A stronger dollar makes gold more expensive for holders of other currencies, leading to decreased demand.

Technical Analysis

The recent pullback in gold prices could be part of a corrective wave (Wave C) in Elliott Wave terms, suggesting a potential for further decline before a possible upward movement. Alternatively, this could signal the beginning of a deeper bearish trend, depending on future economic indicators and inflation projections.

Market Outlook

While the current sentiment leans towards optimism due to potential trade resolutions, the situation remains fluid. Investors should monitor upcoming economic data and central bank policies, as these will play crucial roles in determining gold’s trajectory.