Gold price sinks on traders' optimism as strong US Dollar erodes safe-haven demand

• Risk appetite rebounds as Trump exempts some auto tariffs, sparking trade deal hopes.
• Weak US GDP and jobless claims stoke recession fears, but inflation stays near the Fed's 2% target.
• Markets price in 90 bps of Fed rate cuts; eyes now on Friday's Nonfarm Payrolls report.

Gold price tanked close to $70, or 2%, on Thursday as risk appetite improved during the North American session. Trade tensions between the United States (US) and its counterparts eased, keeping investors optimistic for the remainder of the week. At the time of writing, XAU/USD trades at $3,226.

US-China trade tensions eased as news revealed that Washington was contacting Beijing to begin negotiations. US President Donald Trump's decision to exempt some automotive industry tariffs and advances in deals with India, South Korea, and Japan were cheered by investors who bought the Greenback to the detriment of the precious metal.

Data on Wednesday painted a dismal economic outlook for the US as GDP for Q1 2025 contracted and a measure of inflation for the same period jumped. Nevertheless, the Core Personal Consumption Expenditure (PCE) Price Index, sought by the Fed as the preferred inflation gauge, was unchanged, within the 2% handle.

Although this was Gold supportive, positive earnings reports of US companies keep sentiment positive. However, Wall Street's gains remained capped as business activity in the manufacturing sector disappointed traders. This and the rise of Americans filing for unemployment benefits fueled recession fears ahead of Friday's release of the Nonfarm Payrolls report.

After the data release, investors rushed to price in 90 basis points of Fed rate cuts, as revealed by data from Prime Market Terminal.

Source: Prime Market Terminal

Ahead in the week, traders are eyeing the release of April Nonfarm Payroll figures.

Daily digest market movers: Gold price dips as US Treasury yields jump

• Recently released data pushed US bond prices down, increasing US Treasury yields. The US 10-year Treasury note yield rose six basis points, up to 4.229%. At the same time, US real yields increased by six bps to 1.99%, as shown by the US 10-year Treasury Inflation-Protected Securities yields.
• The Institute for Supply Management (ISM) Manufacturing PMI was higher than estimates of 48 and rose by 48.7, down from the March 49 reading. Timothy Fiore, the ISM Manufacturing Business Survey Committee Chair, revealed that demand and production retreated while layoffs continued. He added, "Price growth accelerated slightly due to tariffs, causing new order placement backlogs, supplier delivery slowdowns, and manufacturing inventory growth."
• Initial Jobless Claims for the week ending April 26 rose by 241K, much higher than the 224K expected and up from 223K revealed a week ago.

XAU/USD technical outlook: Gold price poised for pullback below $3,250

Gold price seems to be undergoing a pullback as buyers failed to defend the April 23 swing low of $3,260, exposing the $3,200 mark. The Relative Strength Index (RSI) is falling towards its neutral line, hinting that sellers are stepping in.

Therefore, if XAU/USD clears $3,200, the next support would be the April 3 high, which turned support at $3,167. Once surpassed, the next stop would be the 50-day Simple Moving Average (SMA), at $3,080.

Conversely, if buyers lift Gold prices above $3,300, it would clear the path to challenge $3,350, followed by $3,400.