Risk Sentiment Dulls Gold’s Shine Amid Search for Direction

Gold, often seen as a barometer of market sentiment, is currently reflecting a market caught between strong long-term fundamentals and an absence of short-term conviction. Following a tough week, gold prices have struggled to gain sustained upward momentum as improving risk sentiment—driven by easing geopolitical concerns and equity market strength—has undercut near-term safe haven demand.

Improved Risk Sentiment Weighing on Gold

Last week’s softness in gold was largely attributed to better-than-expected sentiment in broader markets. The downplaying of U.S. political risks—particularly surrounding the reversal or easing of some of former President Trump’s more aggressive economic policies—has encouraged investors to rotate into riskier assets. As a result, gold, which traditionally thrives during periods of uncertainty, has seen near-term outflows.

This improvement in risk appetite has coincided with reduced concerns over the economic impact of tariffs, which were once a major bullish driver for gold. With recent U.S. policy changes showing how quickly tariffs can be withdrawn or softened, markets now appear less convinced of long-term trade disruption risks. This has diminished gold’s appeal as a short-term hedge.

Long-Term Fundamentals Still Intact

Despite this pullback in enthusiasm, the longer-term outlook for gold remains supported by several key structural factors:

• Central bank buying continues to provide a steady floor under gold demand.
• Expectations of lower interest rates over the medium term, particularly in the U.S., reduce the opportunity cost of holding gold.
• De-dollarization trends and scepticism over continued U.S. economic outperformance contribute to a broader diversification into gold as a strategic reserve asset.

So far, prices have remained resilient above the $3,000 level with no meaningful retest of that support zone since early April. However, gold has also failed to convincingly break above resistance at 3,400, underscoring a stalled rally.

Technical Picture: Momentum Faltering, but a breakout is possible

From a technical perspective, there were a series of lower highs on the gold chart—a sign of waning momentum—but Monday’s price action suggested a shift away from this pattern. If this breakout holds and prices consolidate above the $3,400 level, it could reignite bullish interest.

(Past performance is not a reliable indicator of future results)

Short-Term Drivers: Searching for a Catalyst

The near-term trajectory for gold appears to hinge on fresh market-moving news. Renewed tensions between the U.S. and China on trade, or weaker-than-expected U.S. economic data, could be the necessary catalysts to push gold higher. Such developments would increase expectations for rate cuts or signal broader economic stress— both favourable for gold. Without a clear immediate threat or trigger, investors appear reluctant to initiate new long positions despite the strength of the long-term story.

Conclusion: Gold's Narrative Intact, But Near-Term Patience Required

Gold remains supported by robust long-term drivers, but the lack of near-term catalysts has stalled its upward momentum. Until a clearer short-term risk emerges—such as disappointing U.S. data, central bank dovishness, or geopolitical flare-ups—gold may remain range-bound. Traders and investors are advised to watch key levels around $3,400 for signs of a breakout and remain attentive to U.S.-China trade rhetoric and macroeconomic data for cues on the next move.