Gold prices fall as trade optimism and a stronger dollar trigger broad profit-taking
2025-10-22 02:00:57
During the U.S. trading session on Tuesday (October 21st), spot gold prices fell sharply after testing an all-time high near $4,380 on Monday, closing at $4,112.41 per ounce, a 5.6% drop. This pullback came as the U.S. dollar continued its rebound and traders began to lock in profits after gold prices had risen too far.
Rising risk appetite is weighing on gold. Investors are cautiously optimistic, clinging to hopes of easing Sino-US trade tensions. A growing number of positive news reports are fueling expectations that US President Trump's threat to impose 100% tariffs may not ultimately be implemented. This conciliatory tone is driving risk assets higher and further solidifying the dollar's recent strength. However, given the uncertainty surrounding Trump's rhetoric and the fragility of the current negotiations, market uncertainty remains.
Despite the pullback, the overall outlook for gold remains positive. Market expectations of a shift to accommodative monetary policy by the Federal Reserve (Fed) continue to support gold's appeal, as lower interest rates reduce the opportunity cost of holding non-yielding assets like gold. Meanwhile, the ongoing US government shutdown, coupled with lingering geopolitical and economic risks, are maintaining safe-haven demand for gold.
Market drivers: Trade optimism and Fed rate cut expectations dominate the market
U.S. President Trump signaled cautious optimism on Monday, saying he could reach a "really fair and great trade deal" with China after talks later this month during the Asia-Pacific Economic Cooperation (APEC) summit in South Korea. But he also warned that tariffs could be imposed as scheduled on November 1 if no agreement is reached.
U.S. President Donald Trump and Australian Prime Minister Anthony Albanese met at the White House on Monday, during which the two countries signed an $8.5 billion critical minerals agreement.
The US government shutdown has entered its fourth week with no clear end in sight, forcing several key government agencies to furlough employees. However, White House senior adviser Kevin Hassett told CNBC that he expects the shutdown to end "sometime this week."
The dollar strengthened against all major currencies. The U.S. Dollar Index (DXY), which tracks the greenback against six major currencies, hovered near a one-week high of 98.84, extending its gains to a third consecutive session.
This week's US economic data is relatively light, with market focus focused on Friday's Consumer Price Index (CPI) release, which was previously delayed due to the government shutdown. The CPI data comes just days before the Federal Reserve's monetary policy meeting on October 29-30, potentially impacting market expectations for an interest rate cut. According to the CME FedWatch tool, the market currently places a 98.9% probability on a 25 basis point rate cut this month.
Technical Analysis: Spot gold double top pattern suggests potential pullback
A double top pattern appears to have formed on the 4-hour chart of spot gold, with both highs near $4,380, suggesting that the recent uptrend may be showing signs of fatigue.
Gold prices have clearly broken below the 21-period simple moving average (SMA), which will become an immediate resistance level if bulls attempt a rebound.
The short-term outlook is bearish, with initial support at $4,200, the neckline of the double top pattern. A sustained break below this level would confirm a short-term bearish reversal signal, with the next support level pointing to the 50-period simple moving average (around $4,180). A further decline could push gold prices towards the $4,050 area, where the 100-period simple moving average forms a stronger support confluence.
The cautious mood is also confirmed by the Relative Strength Index (RSI), which is trending downwards and forming a bearish divergence with the price. If the RSI falls below the 50 mark, it will further strengthen the possibility of a deep correction in gold prices.
Rising risk appetite is weighing on gold. Investors are cautiously optimistic, clinging to hopes of easing Sino-US trade tensions. A growing number of positive news reports are fueling expectations that US President Trump's threat to impose 100% tariffs may not ultimately be implemented. This conciliatory tone is driving risk assets higher and further solidifying the dollar's recent strength. However, given the uncertainty surrounding Trump's rhetoric and the fragility of the current negotiations, market uncertainty remains.
Despite the pullback, the overall outlook for gold remains positive. Market expectations of a shift to accommodative monetary policy by the Federal Reserve (Fed) continue to support gold's appeal, as lower interest rates reduce the opportunity cost of holding non-yielding assets like gold. Meanwhile, the ongoing US government shutdown, coupled with lingering geopolitical and economic risks, are maintaining safe-haven demand for gold.
Market drivers: Trade optimism and Fed rate cut expectations dominate the market
U.S. President Trump signaled cautious optimism on Monday, saying he could reach a "really fair and great trade deal" with China after talks later this month during the Asia-Pacific Economic Cooperation (APEC) summit in South Korea. But he also warned that tariffs could be imposed as scheduled on November 1 if no agreement is reached.
U.S. President Donald Trump and Australian Prime Minister Anthony Albanese met at the White House on Monday, during which the two countries signed an $8.5 billion critical minerals agreement.
The US government shutdown has entered its fourth week with no clear end in sight, forcing several key government agencies to furlough employees. However, White House senior adviser Kevin Hassett told CNBC that he expects the shutdown to end "sometime this week."
The dollar strengthened against all major currencies. The U.S. Dollar Index (DXY), which tracks the greenback against six major currencies, hovered near a one-week high of 98.84, extending its gains to a third consecutive session.
This week's US economic data is relatively light, with market focus focused on Friday's Consumer Price Index (CPI) release, which was previously delayed due to the government shutdown. The CPI data comes just days before the Federal Reserve's monetary policy meeting on October 29-30, potentially impacting market expectations for an interest rate cut. According to the CME FedWatch tool, the market currently places a 98.9% probability on a 25 basis point rate cut this month.
Technical Analysis: Spot gold double top pattern suggests potential pullback
A double top pattern appears to have formed on the 4-hour chart of spot gold, with both highs near $4,380, suggesting that the recent uptrend may be showing signs of fatigue.
Gold prices have clearly broken below the 21-period simple moving average (SMA), which will become an immediate resistance level if bulls attempt a rebound.
The short-term outlook is bearish, with initial support at $4,200, the neckline of the double top pattern. A sustained break below this level would confirm a short-term bearish reversal signal, with the next support level pointing to the 50-period simple moving average (around $4,180). A further decline could push gold prices towards the $4,050 area, where the 100-period simple moving average forms a stronger support confluence.
The cautious mood is also confirmed by the Relative Strength Index (RSI), which is trending downwards and forming a bearish divergence with the price. If the RSI falls below the 50 mark, it will further strengthen the possibility of a deep correction in gold prices.
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