Gold (XAUUSD) Price Forecast: 50-Day MA Break Opens Door to $3,245

Gold Drops 1.6% as Trade Deal Kills Safe-Haven Demand

Gold fell 1.6% Friday, closing at $3,274.17 as a U.S.-China trade agreement on rare earth shipments sparked risk-on sentiment and crushed demand for safe-haven assets. The metal hit its lowest level since May 29, with geopolitical cooling providing the initial selloff before hot PCE inflation data delivered the final blow.

Will U.S.-China Relations Continue Improving?

The breakthrough trade agreement between Washington and Beijing on expediting rare earth shipments to the U.S. marked a significant step toward economic cooperation. Markets interpreted this as reducing the risk of escalating trade tensions, prompting investors to exit defensive positions in gold.

“The slowdown in geopolitics has offered an opportunity for investors to start taking profit because of the forward-looking prospects of some kind of kinetic war with China and the developments in the Middle East,” said Daniel Pavilonis, senior market strategist at RJO Futures.

Global shares rallied following the announcement, with risk assets gaining ground as traders rotated away from precious metals.

Can Middle East Stability Hold?

The ceasefire agreement between Iran and Israel continues to hold despite minor skirmishes at the start. This ongoing stability in the Middle East further reduces gold’s geopolitical premium, as supply disruption fears across energy and commodity markets fade.

The combination of cooling U.S.-China tensions and sustained Middle East calm creates a challenging environment for gold bulls who have relied on crisis premiums to drive prices higher.

How Did Hot Inflation Data Impact Gold?

Gold was already under pressure from easing geopolitical tensions when Friday’s PCE report delivered a devastating one-two punch. Core inflation surged to 2.7% – well above the Federal Reserve’s 2% target – while personal income plummeted 0.4%.

The hot inflation print crushed any remaining hopes for aggressive Federal Reserve easing, with Treasury yields climbing higher and the dollar strengthening further. Markets that were already down before the PCE release fell even harder as the data confirmed the Federal Reserve’s higher-for-longer stance.

Gold faced a perfect storm – geopolitical cooling destroyed safe-haven demand while hot inflation eliminated rate cut hopes that could have supported the metal.

Market Forecast: Technical Breakdown Signals More Downside

Spot gold extended weekly losses to 2.8% after breaking below the critical 50-day moving average at $3,323.80, triggering accelerated selling. The breach of this key technical level confirms the breakdown and suggests further downside ahead.

Key support levels include $3,245.56 and $3,120.76, with resistance at $3,330-3,350 from the recent breakdown zone. The failure to hold above the 50-day moving average adds technical pressure to fundamental headwinds from cooling geopolitical tensions and hot inflation data.

A stable geopolitical and economic environment reduces gold’s safe-haven appeal, driving investors toward riskier assets while high interest rates make the non-yielding metal less attractive. Any escalation in geopolitical tensions could trigger reversals, but the technical breakdown below the 50-day moving average favors continued weakness.

More Information in our Economic Calendar.