After holding steady above the support level of $300 for a month, GLD gold ETF dropped past it on Tuesday, retesting a level last recorded two weeks ago. As gold price steadies, the ETF is hovering around the crucial level of $300; trading at $299.46 at the time of writing.
The risk-on mood has capped gold price gains as the financial markets digest the surprise US-China trade deal. Besides, the latest US CPI figures signaled less pressure for the Federal Reserve to support the economy. However, central bank buying and OTC investments continue to bolster gold demand as investors remain cautious of the macroeconomy.
GLD Gold ETF steadies despite risk-on mood
In recent months, gold price and its derivatives have skyrocketed as investors seek to safeguard their resources from the persistent economic uncertainties. More specifically, President Trump’s aggressive trade policy had gold price rally above $3,500 an ounce for the first time ever. Subsequently, the GLD gold ETF rose to an all-time high of $317.71 on 22nd April.
While the precious metal is still steady on its uptrend, it has recorded some losses following the surprise breakthrough in US-China trade talks. At the start of the week, the two leading economies reached an agreement to drastically ease on the tariffs imposed on each other’s goods. As highlighted in a joint statement, this deal will be in place for an initial 90-day period.
The highly anticipated trade deal has thawed the trade war ignited by President Trump’s aggressive trade policy. The imposed tariffs have been weighing on financial markets with investors rushing for safety in safe haven assets amid heightened fears of a recession.
However, even with the risk-on mood, GLD gold ETF has held steady around the crucial zone of $300 as investors remained concerned over the state of the economy. While analysts expect the US and China to continue with the trade negotiations, it will be interesting to see the stand of both parties once the 90 days lapse.
It is this wait-and-see attitude that has sustained gold’s safe haven demand. Besides, central bank buying and over-the-counter (OTC) investment continues to support gold price.
Inflation data signals less pressure for Fed to support the economy
Data released by the US Labor Department on Tuesday indicated that the inflation rate came in slightly lower than expected in April. The CPI was at an annualized rate of 2.3%; the lowest since February 2021. With the exclusion of energy and food prices, the core CPI rose by 0.2% from the previous month compared to the forecasted 0.3%.
April’s inflation data did not quite highlight the impact of Trump’s tariffs on the economy. This is largely because the figures tend to be backward-looking, hence capture the situation prior to the levies imposed in April.
Depending on how the US-China trade talks pan out in coming months, higher tariffs are expected to exert upward pressure on US inflation figures. This may in turn influence the Federal Reserve’s decisions.
In its latest meeting, the central bank maintained a watch-and-see approach while acknowledging the impact that an aggressive trade policy may have on the economy.
With Trump’s softening attitude, markets may price in two interest rate cuts before the year ends; down from the previously expected three. This is based on the argument that the Fed will feel less pressure to offer support to the economy. Notably, higher interest rates increase the opportunity cost of holding the non-yielding bullion.
GLD ETF stock price analysis
The daily chart shows that the GLD ETF stock peaked at around $320 in April as gold price continued soaring. It then suffered a big reversal as it formed a double-top pattern whose neckline was $295, its lowest level on May 1.
GLD has moved below the key support level at $300. It also remains above the 100-day Exponential Moving Average (EMA). Therefore, the fund will likely continue falling as sellers target the 100-day moving average at $278.
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