Gold Prices Fall for Second Day on Trade Deal Hopes and Fed Forecast

• BY Ellyana
• May 8, 2025
• 0 Comments

Gold prices continued their two-day decline, falling close to 1% on Thursday as risk appetite improved in anticipation of a possible UK-US trade deal, pushing investors out of safe-haven assets. Market sentiment improved after both governments made announcements that suggested an agreement was close at hand, although details are still thin. Further pressure on gold was exerted by the Federal Reserve’s move to keep interest rates unchanged and Fed Chairman Jerome Powell’s statements underscoring the U.S. economy’s strength amidst continuing trade tensions. Amidst short-term fixes ruling the market, there are still hedge funds that are optimistic about gold, such as Waratah Capital Advisors, placing bets on its long-term worth amidst global economic volatility. KEY LOOKOUTS • Markets are waiting anxiously for the 14:00 GMT statement by President Trump, with speculation that a speedy agreement might be narrow in scope. A delay or disappointing detail might spur a rebound in gold prices. • Support is being tested at $3,338 immediately, with additional downside potential to $3,311 and $3,245. On the upside, important resistance lies at $3,413 and $3,462 if bullish momentum returns. • The Fed’s keeping rates at 4.25%-4.50% and Powell’s cautious rhetoric indicate no cuts until summer, putting pressure on gold in the near term but allowing room for a rebound if economic indicators soften. • Even after the recent pullback, funds such as Waratah Capital Advisors remain optimistic about gold’s upside potential, banking on longer-term gains in the face of geopolitical uncertainty. Gold prices fell for a second consecutive day on Thursday, dropping close to 1% to $3,333 as optimism about the possibility of a UK-US trade deal and a solid Federal Reserve outlook increased. The expected announcement, due at 14:00 GMT, has lifted risk appetite, and investors have begun to rotate out of safe-haven assets such as gold. Although the details of the agreement are yet to be confirmed, preliminary reports indicate that it might be narrow in scope. Further, the Federal Reserve’s holding of interest rates steady and comments from Chair Jerome Powell on the resilience of the economy have also pinned down gold. Some hedge funds such as Waratah Capital Advisors, however, remain positive and consider gold a strategic hedge during a global trade environment that is uncertain. Gold prices declined almost 1% for a second day in a row as hopes for a UK-US trade deal dampened demand for safe-haven assets. The fall was also underpinned by the Federal Reserve’s consistent interest rate policy and positive economic outlook. •  Gold (XAU/USD) fell almost 1% on Thursday, continuing a correction that started the day before, trading at $3,333 in early European hours. •  Expectation of a UK-US trade deal announcement at 14:00 GMT has enhanced global risk sentiment, leading to a move away from safe-haven assets such as gold. •   Markets are expecting further trade deals to come, which is lowering global uncertainty and leading investors to offload gold holdings. •  The Fed left interest rates at 4.25%-4.50%, indicating that no cuts are likely before summer, which pressured gold further. •  Fed Chairman Jerome Powell recognized the resilience of the economy but cautioned against potential tariff-induced effects down the road. •  Gold has support at $3,338 and $3,311, with firmer technical support at $3,245. Resistance would come in at $3,413 and $3,462 should prices recover. •  In spite of the recent fall, funds such as Waratah Capital Advisors are adding exposure to gold, seeing it as a long-term protection against global trade tensions. Gold prices fell further for the second day in a row as global markets responded positively to reports of an imminent trade deal between the United States and the United Kingdom. The news, due at 14:00 GMT, has given hope of other trade agreements in the offing, as geopolitical tensions have been eased. Such improved optimism has lowered the need for other traditional safe-haven assets such as gold, which investors often use when the climate is not certain. Confirmation from US and UK authorities, including comments from Bloomberg and the Financial Times, has lent credibility to the mooted agreement, although final terms of the deal are unclear. XAU/USD DAILY PRICE CHART CHART SOURCE: TradingView The additional pressure on gold was added by the Federal Reserve’s recent move to keep interest rates unchanged at 4.25%–4.50%, in line with expectations. Fed Chairman Jerome Powell said that although the US economy continues to be strong, the full effects of tariffs and international uncertainty could still be seen later this year. In the absence of any near-term rate cuts to come, which usually favors non-yielding assets such as gold, some investors still believe in gold’s long-term worth. Hedge funds like Waratah Capital Advisors keep supporting gold as a haven in light of persistent trade tensions and possible economic realignments. TECHNICAL ANALYSIS Gold has been recently rejected close to the R1 resistance level of $3,413 after a short-lived rally, indicating significant selling pressure at the area. It is now testing the support at $3,338, which has remained short-term significant during recent sessions. If bearish momentum persists, gold may fall to the next support at $3,311, although this level is symbolic rather than structurally relevant. A more profound correction may find firmer support around $3,245, which has functioned historically as a significant floor. To the upside, a reversal must overcome $3,413 convincingly to aim for the next resistance around $3,462. FORECAST If the forthcoming UK-US trade deal disappoints markets or is seen as symbolic, gold may experience another bout of upward rush as investors pile in looking for safe haven on ongoing uncertainty. Otherwise, any indication of economic weakness to be seen in subsequent US data, or surprise dovish hints from the Federal Reserve, might resuscitate the bullish trend. If that happens, gold might try to regain the $3,413 resistance level, and a breakout above it could pave the way towards $3,462 and higher. Alternatively, if the U.S.-UK trade deal is received positively and leads to more large-scale global agreements, risk appetite might keep increasing, and demand for