Gold bleeds after US-China agree to major tariff reductions, easing fears of protracted trade war

• Gold price sinks as the US and China agree to a major reduction in tariffs for 90 days..
• China will lower its tariffs on US goods to 10% from 125%, while the US will do so to 30% from 145%.
• Safe-haven outflows lead Gold to test vital supports before technically ending the rally. 

Gold (XAU/USD) sinks more than 2.5% at the start of the European trading session and heads towards $3,233 at the time of writing as the talks between the US and China have brought some low-hanging fruit for the equity markets. China has agreed to lower its tariffs on the United States (US) to 10% from the initial 125%, while the US will lower its tariffs on China to 30% from 145%, both for 90 days. The announcement caused a risk-on wave in markets, with investors fleeing from safe-haven assets such as Gold. 

US President Donald Trump on Friday already hinted at the possibility that the talks could be productive and issued a general message to "buy stocks now" on his Truth Social Network. In this context, Gold has already lost nearly 8% from its all-time high at $3,500 reached on April 21 

Daily digest market movers: Spill over shock

• The US-China deal to temporarily remove tariffs has sent shockwaves in financial markets:  US yields are climbing higher, with the US 10-year yield hitting 4.43%, a level not seen since the beginning of April. Expectations are that a surge in demand on the back of this tariff relief could lead to a spike in inflation. 
• In the commodity space, Oil is rocketing higher by more than 2% to $62.50 at the time of writing, as demand is expected to pick up again as trade tensions ease. 
• Equities are also surging, with Chinese stocks rallying over 1%. European stock indices see milder gains, while US futures are outperforming with gains between 2.50% and 3%. 
• US Treasury Secretary Scott Bessent said that "neither the US nor China wants to decouple" and that he would like to see China open its market more to US goods. A possibility for a purchasing agreement is possible, Bessent went on to say in the statement, Bloomberg reports. 

Gold Price Technical Analysis: Don't catch a falling knife

Time to roll up your tents and clear the field for the safe-haven outflow avalanche that will likely take place on Monday. Expectations are that a second wave of selling could take place once the US session comes online. It is not unlikely that, with the amassed selling orders, prices could drop below $3,200 soon. 

Should this occur, the pressure is on both the S2 support and that technical pivotal level at $3,245 coinciding. Once that level snaps, look for a substantial leg lower, below $3,200, towards $3,167. With that move, nearly all gains from April and May would be erased. 

Looking up, a whole list of levels need to be reclaimed in its recovery to retest the all time high at $3,500. First the daily S1 support (which is now a resistance) at $3,284 needs to be achieved. The daily pivot at $3,315 is up next, followed by the R1 resistance around $3,356 and the R2 up next at $3,388.

XAU/USD: Daily Chart