Gold Price Holds $3,340: Will XAU/USD Explode Toward $3,500 as CPI and Trade Talks Collide?

Gold Price (XAU/USD) Holds Above $3,340 As US-China Talks, CPI Data Shape Next Big Move

Can Gold Break Above $3,375 And Challenge $3,500 This Month?

Gold Price Nears Key Resistance At $3,350 Amid Trade Diplomacy And CPI Tensions

Gold (XAU/USD) is trading around $3,340 as Tuesday's European session progresses, up roughly 0.3% from earlier lows of $3,301.54. The precious metal remains firmly supported by the 20-day moving average near $3,303, with buyers eyeing a breakout above the $3,350 resistance zone. The market’s short-term direction hinges on two catalysts: US-China trade talks continuing in London and upcoming US inflation data that could reshape Federal Reserve policy expectations.

Optimism about progress in London was dampened by a lack of tangible breakthroughs so far. While US Commerce Secretary Howard Lutnick labeled the talks as “going well,” markets have become more cautious as discussions drag into a second day. The outcome will significantly impact the US Dollar and Gold price trajectory, given the direct link between trade sentiment, global risk appetite, and safe-haven demand.

US-China Trade Talks Influence Risk Appetite And XAU/USD Correlation With USD

The current diplomatic thaw has already seen China agreeing to ease export controls on rare earths—critical inputs for semiconductors, EVs, and defense products. US officials, including Kevin Hassett, expect further moves to relax export restrictions in exchange for concessions on tech flows into China. These developments are capping the US Dollar's upside and supporting Gold.

However, lingering uncertainty is restraining bullish conviction. The market’s sensitivity was evident as XAU/USD reversed from a low of $3,301.54 and stabilized near $3,336.33 intraday. Any positive or negative headline from the London talks can trigger sharp moves in both USD and Gold this week.

China’s May exports to the US plunged by 35% YoY—deepest drop since early 2020. This trade weakness adds another layer of geopolitical risk, underlining Gold’s role as a defensive asset in portfolios.

All Eyes On US CPI: Could Higher Inflation Spark A Break Above $3,375?

Another key driver this week is Wednesday’s US CPI release. Markets expect headline CPI to rise 0.2% MoM (vs. 0.3% prior) and 2.5% YoY (up from 2.3%). Core CPI is seen at 0.3% MoM and 2.9% YoY. Any upside surprise could challenge market pricing for a September Fed rate cut and lift USD yields—potentially putting Gold under short-term pressure.

Recent jobs data surprised to the upside: Nonfarm Payrolls showed +139,000 jobs in May (vs. 130,000 est), with wage growth also exceeding forecasts. This has already caused markets to scale back expectations for imminent rate cuts. According to the CME FedWatch Tool, there is now a 54.7% chance of a 25bp cut in September, with no action likely at the June and July FOMC meetings.

If Wednesday’s CPI reinforces a “higher for longer” Fed stance, Gold may test support levels below $3,300. Conversely, if inflation cools faster than expected, rate cut bets would intensify, propelling XAU/USD higher.

Technical Picture: Bulls Eye $3,375-$3,400 As Short-Term Targets

From a technical standpoint, Gold holds a constructive setup despite recent volatility. The metal remains above its 20-day SMA at $3,303, and the $3,300 psychological level continues to attract dip buyers. The $3,350 level acts as immediate resistance, with a break likely triggering momentum toward $3,375—Friday’s swing high—and ultimately $3,392.

Beyond that, bulls will eye the April all-time high of $3,500. However, momentum is lacking: the RSI on the daily chart hovers near 50, reflecting trader indecision. On the downside, strong support lies at $3,291 (23.6% Fib retracement of the Jan-April rally), followed by $3,270 (50-day SMA) and $3,240 (symmetrical triangle apex).

Short-term pullbacks toward $3,297-$3,303 are likely to be bought aggressively. Institutional demand remains robust, as evidenced by persistent ETF inflows and central bank accumulation.

Institutional And Central Bank Demand Provides Solid Floor Under Gold

Behind Gold’s resilience is powerful institutional and sovereign demand. Central banks globally continue stockpiling gold to diversify reserves amid geopolitical instability and fiscal concerns. Moreover, public companies are also adding to positions: KULR Technology Group announced a new $300 million capital raise to boost its Gold reserves.

On the ETF side, spot gold ETFs saw net inflows of $386.27 million on Monday, snapping a two-day outflow streak. This reflects a rebound in institutional appetite, even as short-term traders remain cautious ahead of CPI.

The longer-term outlook is equally bullish: central banks remain net buyers, with several monetary authorities expected to continue adding to gold positions throughout 2025. This trend provides a durable tailwind for XAU/USD.

Macro Risks And Geopolitical Factors Keep Safe-Haven Demand Alive

While easing US-China trade tensions have pressured Gold’s safe-haven premium, other geopolitical risks remain elevated. The recent escalation of Russian military operations near Ukraine’s Dnipropetrovsk region and new US travel bans have kept global investors on alert.

Additionally, macro uncertainties surrounding the US debt ceiling and fiscal trajectory could spark renewed flows into Gold if confidence in Treasuries deteriorates. Current market positioning reflects this nuanced picture: the Gold margin long-to-short ratio at OKX stands at a balanced 4x, signaling bullish bias without extreme positioning.

Notably, despite Gold’s recent rally, its Market Value to Realized Value (MVRV) ratio sits at 2.34—well below levels historically associated with market tops (above 3.7). This suggests further upside potential remains.

Outlook: Can Gold Rally Toward $3,500 Or Will Fed, USD Hold It Back?

In the coming sessions, Gold faces key inflection points. A softer CPI print could trigger a breakout toward $3,375-$3,400, with bulls targeting the $3,500 mark in the weeks ahead. Conversely, stronger inflation or hawkish Fed signals could drive consolidation below $3,340, with $3,297-$3,303 offering key downside support.

Institutional flows, central bank buying, and geopolitical risk will continue underpinning demand. While the easing of US-China tensions limits panic-driven buying, macro tail risks ensure that Gold’s appeal as a portfolio hedge remains intact.

Market participants will be closely watching whether XAU/USD can sustain momentum through $3,350 and $3,375 in the near term—a decisive breakout here would set the stage for a potential retest of all-time highs later this summer.

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