Credit: Kitco

Gold prices fell more than 3% on Wednesday as markets continued to digest President Donald Trump's softened rhetoric regarding the U.S.-China trade war and his reversal on wanting to fire Federal Reserve Chair Jerome Powell.

While gold is undergoing significant profit-taking, analysts emphasize that the long-term bull trend remains largely intact. Spot gold last traded at $3,281.94 an ounce, down nearly 3% on the day. Prices are now more than 6% below Tuesday’s highs of $3,500. Nevertheless, gold remains up over 25% year-to-date and nearly 41% over the past 12 months.

“As far as the gold outlook is concerned, the precious metal has dropped quite a bit in the last couple of days, but that is still merely a drop in the ocean compared to how much it has gained,” said Fawad Razaqzada, Market Analyst at StoneX Group, in a note Wednesday. “The sharp two-day pullback means gold is now down 6.8% from its all-time high, hitting a low of roughly $3,260—a significant move to the downside. However, the long-term trend remains clearly bullish.”

Looking ahead, Razaqzada said that a test of support at $3,100 would prompt him to reassess gold’s uptrend.

“The long-term technical outlook will only turn negative if we begin printing lower lows and lower highs,” he said. “With that in mind, keep an eye on the $2,956 level, which marked the most recent significant low before gold broke to new record highs. As long as that level holds, any short-term pullback should be taken with a pinch of salt and viewed as a potential buying opportunity rather than a signal to pursue bearish setups. However, if that level breaks, then it would be prudent to abandon a bullish bias—at least in the short term.”

David Morrison, Senior Market Analyst at Trade Nation, noted that even at $3,300, gold remains technically overbought based on momentum indicators, and a deeper correction may be needed to reset market sentiment.

“It’s also possible we see a more substantial pullback, with $3,000 acting as a much more significant support level. Such a move would likely flush out weaker hands, especially latecomers to the rally. If $3,000 holds, allowing the daily MACD to reset, gold could potentially mount another rally to new highs. But it’s still early, and the shape of the pullback will be crucial once it plays out,” he said.

President Trump eased some market concerns by announcing a reduction of the 145% tariffs on Chinese imports. He also stated on Tuesday that he has "no intention" of firing Powell, whose term ends in 2026.

Treasury Secretary Scott Bessent reinforced that message on the sidelines of the International Monetary Fund and World Bank spring meetings in Washington, D.C., stating, "There is an opportunity for a big deal here.”

However, he also acknowledged that a full trade deal could take two to three years to finalize.

Although recession fears have diminished, some analysts argue that the global economy has already suffered considerable damage and that restoring trust in the U.S. as a reliable trade partner will take time. In this environment, gold is expected to remain well-supported.

“The much bigger picture is that the fundamental dynamic for reserve assets has completely changed since 2022, and tariffs have only intensified that shift,” said David Miller, Senior Portfolio Manager of Catalyst Funds’ Gold Enhanced Yield ETF (GOLY), which is up 25% year-to-date. “The real driver here is central banks. They purchased over 1,000 metric tons of gold in 2023 and 1,060 in 2024, and they’ve only accelerated that trend this year. I believe that’s a much bigger factor than street-level activity or individual investor behavior. Over the long term, the key story is that central banks from BRICS nations and other emerging markets are replacing their dollar reserves with gold.”

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