Weak economic data supported gold's rebound to above $3,200, but short-term fluctuations cannot be ignored

Gold prices have rebounded above $3,200 an ounce, driven by weak U.S. economic data and easing inflationary pressures. While gold's long-term upward trend remains intact, market analysts point out that the precious metal will still experience significant volatility in the short term.

According to recent comments from Fawad Razaqzada, a market analyst at City Index and FOREX.com, gold prices could fall to $3,000 an ounce in the short term. Despite weakness at the start of the week, spot gold has rebounded to around $3,237 an ounce, a nearly 2% gain on the day.

Razakzada noted that as global trade tensions have eased, investor risk appetite has increased, putting pressure on gold. "Without major negative factors weighing on the stock market, market sentiment has clearly shifted to optimism, leaving gold vulnerable," he explained. "Technical indicators show that gold has recently formed lower lows and lower highs, putting it under significant short-term pressure."

He advised investors to focus on the support levels of $3,100 and $3,000, and said this correction could be a buying opportunity. "The long-term uptrend remains intact, and despite today's price rebound, bearish pressure may continue to build."

Furthermore, Razakzada highlighted rising long-term U.S. Treasury yields as a key factor potentially supporting gold. The 30-year Treasury bond yield rose to 4.9%, its highest level since January. "Even with both the Consumer Price Index (CPI) and Producer Price Index (PPI) coming in below expectations, and concerns about inflation from a new round of tariffs easing, long-term yields haven't fallen significantly, which may keep the Federal Reserve on its toes."

Meanwhile, Suki Cooper, precious metals analyst at Standard Chartered Bank, warned that a rebound in the US dollar and tightening expectations for rate cuts could put pressure on gold prices. She noted, "The US dollar has recovered some of its losses, and the market has quickly adjusted its expectations for rate cuts. The US dollar index is currently trading at levels last seen over a month ago. Market expectations for rate cuts to be scaled back to 49.1 basis points by the end of this year have largely faded, with expectations for a June rate cut essentially fading."

Cooper said the strengthening dollar has led to a reduction in gold holdings, and market concerns about inflation and economic slowdown have eased, while concerns about stagflation and recession have also eased. However, she added that there are still multiple uncertainties in the global economy that may provide continued support for gold.

"Barring significant short-term weakness, we remain bullish on gold's upside momentum. Investors should focus on exchange-traded product (ETP) flows, official purchasing demand and market buying," Cooper concluded.