Gold could decline to 3,200 as market adapts to trade risks and correction

Gold finished last week with a decline, falling to the level of $3,294.88 per ounce amid mixed market signals and a temporary cooling of trade tensions. A US federal court's ruling to block Trump's tariffs weakened the yellow metal’s appeal as a defensive asset, leading to its short-term decline. Gold started Monday's trading at $3,312 per ounce following news of a new round of trade tensions.

Gold prices are still affected by Trump’s claims to double tariffs on steel and aluminum from 25% to 50% starting June 4. However, the market has already started to price in these risks, which limits the potential for further growth. Besides, litigation concerning the legitimacy of measures taken by the Trump administration is causing more uncertainty and weighing on the market. Investors are starting to take profits, which adds to the pressure on gold.

The geopolitical situation remains tense, yet markets show the signs of adapting to the current reality. Interest in defensive assets is supported by the tensions in Eastern Europe, as well as by relations between the United States and China escalating after Trump accused China of trade agreement violation. However, the slowing US economy and lower confidence in long-term US securities are already partially reflected in the yellow metal's current price, which is limiting its upside potential. 

The technical analysis shows that gold dynamics is fueled by the upward momentum, but approaching the resistance level of 3,380 could spark a correction. The RSI is at 57, indicating a neutral market condition, but approaching the overbought zone increases the probability of a pullback. The price is holding above the exponential moving averages, EMA (20) and EMA (50), but the distance is narrowing. The support level is around 3,250. If this level is broken, the price could move further to 3,200. 

Current recommendation:

Consider selling at the current price as part of a short-term strategy. Take profit – 3,200. Stop loss – 3,380.