Chinese Buying Drives Gold Up May 6; Strong Dollar Trims Gains May 7 Morning

Spot gold traded at $3,392 per ounce in London at 06:00 GMT, down 0.7% from Tuesday’s high. U.S. June futures hovered near $3,392.74 as markets awaited the Federal Reserve’s policy decision.

Traders attributed Monday’s pullback to a renewed appetite for riskier assets and firmer bond yields. Asian trading saw XAU/USD dip to $3,380 before finding support near its 20-hour exponential moving average.

Shanghai gold volumes topped records, reflecting robust physical demand in China’s reopening economy. However, gains there faded as local equities outperformed bullion.

European markets opened lower on renewed euro strength versus the U.S. dollar. The dollar index rose 0.4% to 102.7, weighing on non-yielding gold. Dollar strength often dims bullion’s safe-haven appeal.

India’s domestic 24-carat gold price fell ₹880 to ₹96,950 per 10 grams amid profit taking. Traders there booked gains ahead of the Fed meeting. China resumed gold imports after the May Day holiday but saw tepid wholesale gains.

ETFs recorded record Q1 inflows of 226 tonnes, driven by surging investor demand. This week saw modest ETF outflows as risk appetite recovered. Central banks maintained steady purchases, underpinning long-term bullion support.

COMEX traders trimmed net long positions to their lowest year-to-date levels by late April. That move reflected profit taking after April’s 23% year-to-date rally. Lower managed money positions could offer buying opportunities.

Gold Market Outlook

Gold’s hourly chart shows support near $3,385 at the 20-hour SMA. Resistance awaits near $3,426 at the upper Bollinger Band. Chartists watch $3,350 as a key intermediate floor.

“Gold seems to pull back amid a broad risk-on move,” said Edward Moya at OANDA. Banks and hedge funds repositioned ahead of today’s Fed statement. Traders expect any dovish hint to spark a renewed gold rally.

Investors eye the Federal Reserve’s policy announcement for clues on rate outlook. A stable-to-hawkish stance could pressure bullion further. Conversely, dovish signals would likely boost safe-haven demand.

Market participants remain cautious amid fading seasonal demand and rising yields. Physical buying in India and China still supports prices at elevated levels. Traders stand ready to adjust positions as global data flows emerge.

Ten-year U.S. Treasury yields climbed to 3.6%, undermining bullion’s opportunity cost. Rising yields often reduce non-yielding asset appeal like gold. Yields’ reaction hinged on stronger factory orders and jobless claims reports.

Renewed hopes for U.S.-China trade talks undercut gold’s safe-haven status. Negotiators plan a high-level meeting later this month. Progress in trade talks could shift investor focus away from bullion.

Gold must hold $3,385 support to avoid deeper losses. A break above $3,420 would signal fresh bullish momentum. Traders await tomorrow’s U.S. consumer price index for further guidance.

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