Lagos — After pulling back slightly from its record high of $3,500, gold has shifted into a consolidation phase.
In my view, near-term range trading is likely to persist, but the medium- to long-term bullish trend remains firmly intact.
In the short term, three factors are shaping gold’s direction: U.S. tariff negotiations, the market’s reassessment of U.S. economic outlook, and the Fed’s monetary policy stance.
As trade tensions ease – particularly with Trump’s softer rhetoric on China – safe-haven demand has cooled, weighing on gold.
Although negotiations may progress slowly, the White House’s renewed willingness to engage has shifted market sentiment from panic selling to cautious optimism, putting some downward pressure on gold.
Meanwhile, despite a string of weaker survey data, better-than-expected readings in durable goods orders, initial jobless claims, and S&P Global PMIs have temporarily weighed on gold by tempering recession fears.
That said, the Fed’s rate cut path remains highly uncertain, largely due to the asymmetric effects of tariffs on inflation and economic growth. Price spikes tend to materialize quickly, whereas their drag on economic growth unfolds through a more complex transmission process.
This mismatch could keep the Fed locked in a “wait and see” mode, delaying rate cuts and capping gold’s upside in the near term.
Key upcoming data – particularly Friday’s nonfarm payrolls report – could prove pivotal. If we see signs of labor market deterioration, such as headline job gains falling below 100,000 and a notable uptick in the unemployment rate, recession fears could intensify.
In that case, expectations for a June Fed rate cut would likely firm, potentially reigniting another leg higher in gold.
Nonetheless, on a higher time frame, traditional drivers such as continued central bank gold buying, heightened geopolitical risks, and declining real interest rates should continue to offer support to gold prices.
*Dilin Wu Research Strategist at Pepperstone
