During Wednesday’s North American trading hours, the price of gold (XAU/USD) rose to around $3,310, recovering from a more than 1% drop the day before. This increase occurred even as investors grew more confident about the possibility of a trade deal between the United States (US) and the European Union (EU). US President Donald Trump expressed optimism on Truth.Social about the EU’s efforts to negotiate a trade deal with Washington, saying that he was pleased with the 50% tariff allocation and that the EU had reached out to set up meeting dates. This positive development comes amidst improving global economic conditions, with both the US and EU being key players in global trade. This has weakened demand for safe-haven assets, such as gold, which typically benefit during times of economic uncertainty.
The optimism about the potential trade deal has also boosted the US Dollar (USD), with the US Dollar Index (DXY) initially rising but then giving up some of its gains to trade near 99.50, although it has recovered from the monthly low of 98.70 recorded on Monday. A stronger USD makes gold a relatively expensive investment, which could limit its appeal to investors.
Technically, gold is facing resistance around $3,335, near an upward-sloping trendline on the daily timeframe drawn from the peak on December 12 at $2,726. However, the overall trend for gold is bullish as it remains above the 20-day Exponential Moving Average (EMA) at $3,288. The 14-day Relative Strength Index (RSI) is currently ranging between 40.00 and 60.00, indicating indecision among traders.
In terms of levels to watch, the May 7 high of $3,440 is a key resistance level for gold, while the May 15 low of $3,120 will act as a significant support zone.