Gold (XAU) Rebounds Nearly 1% as China Considers US Trade Talks

Gold (XAU/USD) trades around $3,262 on Friday, ending a three-day losing streak as China signals potential willingness to engage in trade discussions with the Trump administration.

Gold (XAU) Recovers After Three-Day Correction

Gold (XAU/USD) is showing signs of recovery, trading at approximately $3,262 on Friday at the time of writing. This upward movement comes after a three-day correction period that was primarily driven by developments related to tariff easing. The precious metal's recent downturn can be attributed to several factors, most notably executive orders signed by US President Donald Trump providing relief to the automotive sector.

The main catalyst for today's reversal in the gold market appears to be reports from Bloomberg that China is considering opening discussions with the Trump administration regarding a potential trade deal. This news has shifted market sentiment, though the initial reaction has been bearish for gold as prospects of reduced trade tensions typically decrease demand for safe-haven assets.

XAU Price Faces Technical Hurdles Despite Positive Momentum

Although the gold rally may be temporarily paused, with a return to the all-time highs of $3,500 unlikely in the immediate future, market analysts caution that significant risk factors remain. The potential trade negotiations between China and the US introduce the possibility of a shock event, particularly if discussions deteriorate. Pressure exists on both sides – China faces economic growth erosion from tariffs, while President Trump has yet to deliver tangible results on trade deals after his first 100 days in office.

From a technical perspective, gold (XAU) is currently navigating a challenging area. The daily pivot aligns with the technical pivotal level from April 11's high at $3,245. In close proximity, the first R1 resistance presents itself at $3,254. For a definitive breakout, traders should monitor the R2 resistance at $3,332, which would confirm the end of the three-day losing streak.

On the downside, S1 support provides a cushion at $3,197, coinciding with Thursday's low. Further below, the technical pivotal floor near $3,167 (April 3 high) comes into play, followed by S2 support at $3,155.

US Debt Holders: A Key Factor for XAU Market Sentiment

A significant tail risk that warrants attention is the leverage held by major US debt holders. Japan, being the largest foreign holder of US debt with holdings of $1,125.9 billion, has explicitly indicated that these holdings serve as a negotiation tool with the Trump administration. Japanese Finance Minister Katsunobu Kato made this statement on Friday, marking the first time Japan has openly acknowledged its position as a massive creditor to the United States, according to Reuters.

China ranks as the second-largest holder of US debt, with total holdings of $784.3 billion, while the overall US debt amounts to approximately $26,025.4 billion. This financial interconnectedness adds another layer of complexity to trade negotiations and could potentially impact gold (XAU) prices if tensions escalate.

Gold (XAU) Reacts to Fed Rate Cut Expectations and Employment Data

Interest rate expectations continue to influence gold (XAU) prices. According to the CME FedWatch tool, the probability of a Federal Reserve rate cut in May stands at 6.4%, while the chance of no change is 93.6%. For June, the likelihood of a rate cut increases to 57.8%.

The upcoming Nonfarm Payrolls report, scheduled for release at 12:30 GMT with a consensus estimate of 130,000 (compared to the previous figure of 228,000), could significantly impact these expectations. A substantial negative surprise might increase rate cut bets for both June and possibly May, which would typically support gold prices. Conversely, if the employment data exceeds expectations, it could delay Federal Reserve rate cuts further, potentially putting pressure on gold (XAU) in the short term.

Corporate Activity in the Gold (XAU) Sector

Adding to the news affecting the gold market, shares of Gold Road Resources Ltd. were suspended from trading in Sydney amid "media speculation regarding a potential change of control transaction." According to an exchange filing on Friday reported by Bloomberg, the suspension will remain in effect until the market opens on May 6, unless the company issues an announcement before then. This development highlights ongoing corporate activity within the gold mining sector, which can influence market sentiment toward the precious metal.

China's Commerce Ministry Signals Potential Trade Talks

According to Bloomberg, China's Commerce Ministry released a statement on Friday acknowledging that senior US officials have repeatedly expressed willingness to engage in discussions about tariffs with Beijing. The ministry urged Washington officials to demonstrate "sincerity" toward China, stating, "The US has recently sent messages to China through relevant parties, hoping to start talks with China." The statement added that "China is currently evaluating this."

Furthermore, National Economic Council Director Kevin Hassett indicated that the Trump administration is making progress in tariff discussions and expects news by the end of Friday, as reported by Reuters. These developments have immediate implications for gold (XAU) prices, as reduced trade tensions typically decrease the appeal of gold as a safe-haven asset in the short term.

However, market analysts remain cautious about the sustainability of any potential agreement, given the complex dynamics involved and the significant economic stakes for both nations. The outcome of these potential trade talks will likely continue to influence gold (XAU) price movements in the coming weeks.