Sample Category Title

Gold (XAU/USD) has staged an impressive positive performance of 19% in the first quarter of 2025, which even outperformed other cross asset classes, such as the US S&P 500 (-4.6%), US Dollar Index (-4%), and Bitcoin/USD (-11.7%) over the same period.

• Gold (XAU/USD) rose 19% in Q1 2025, outperforming major asset classes like the S&P 500, US Dollar Index, and Bitcoin.
• After hitting an all-time high of US$3,500 on 22 April, Gold corrected 10% to US$3,120 by 15 May, driven by a stronger US dollar and improved risk sentiment.
• Weak US consumer sentiment and rising inflation expectations suggest a lingering stagflation threat, supporting potential demand for Gold as a hedge.
• The 10% decline found support at the 50-day moving average, with bullish elements emerging, including a higher low and RSI stabilization.
• A break above US$3,305 could trigger a bullish reversal toward US$3,435–US$3,500, while a drop below US$3,056 may expose deeper support levels near US$2,833.

The yellow metal extended its bullish impulsive up move sequence in April to record a monthly gain of 5.3% and hit a fresh all-time intraday high of US$3,500 on 22 April 2025.

Thereafter, Gold (XAU/USD) staged a 10% corrective decline to print an intraday low of US$3,120 on 15 May 2025, within its ongoing major uptrend phase. This was triggered by a revival of the US dollar and risk-on sentiment due to optimism arising from the de-escalation of US-China trade tensions.

Interestingly, there are several factors at play now that suggest Gold (XAU/USD)’s recent three weeks of corrective decline have hit an inflection zone to kickstart a potential medium-term bullish reversal process.

Stagflation risk is still lingering around

Fig 1: University of Michigan Consumer Sentiment & Inflation Expectations as of May 2025 (Source: TradingView)

Consumer sentiment survey results are considered leading “soft” economic data, which may translate into similar outcomes for “hard” data such as retail sales in the coming months.

Given that retail sales in the US play a pivotal role in shaping the trend of services activities, which contribute close to three-quarters of US economic growth, such “soft” data on consumer sentiment is likely to be scrutinized by market participants, in turn, triggering a feedback loop back into the financial markets.

Despite the recent conclusion of the 90-day pause on reduced tariff rates between the US and China that was agreed on 11 May, the latest preliminary University of Michigan Consumer Sentiment survey results for May, conducted between 22 April to 13 May dropped sharply to 50.8 down from 52.2 in April and well below market expectations of 53.4. This marks the fifth consecutive monthly decline, the lowest reading since June 2022, and the second lowest on record (see Fig 1).

In addition, the subcomponents of the University of Michigan survey also cover inflationary expectations (future inflationary trends in the US). The one-year head inflation expectations in the US accelerated for the sixth consecutive month to 7.3% in May 2025, reaching a new high since November 1981.

Meanwhile, the five-year inflation expectations quickened for the fifth month to 4.6% in May, its steepest reading since March 1991.

Overall, these observations point to a persistent risk of stagflation in the US, which could drive increased hedging demand for Gold (XAU/USD).

Let’s review Gold (XAU/USD) to decipher its medium-term directional bias from a technical analysis perspective.

Technical chart of Gold -10% corrective decline managed to stall at the 50-day MA

Fig 2: Gold (XAU/USD) medium-term & major trends as of 20 May 2025 (Source: TradingView)

Interestingly, in the past week, several technical conditions have emerged to suggest that the bearish momentum of the 10% corrective decline from 22 April to 15 May has eased, where the next price movement of Gold (XAU/USD) may stage a bullish reversal.

Firstly, the corrective decline has managed to stall right at the rising 50-day moving average, acting as an intermediate support at around US$3,130 on 15 May, thereafter price actions staged a rebound of 3.8% before a retest on the 50-day moving average on Friday, 16 May, and formed a “higher low”.

Secondly, the daily RSI momentum indicator has managed to find “support” at the 44 level on 14 May, where two prior similar observations occurred previously on 30 December 2024, and 8 April 2025 led to significant bullish reversal in the price actions of Gold (XAU/USD) (see Fig 2).

Watch the US$3,056 key medium-term pivotal support, and a clearance above US$3,305 (also the 20-day moving average) increases the impetus of a potential bullish reversal to see the next medium-term resistances coming in at US$3,435 and US$3,500 in the first step.

However, failure to hold at US$3,056 invalidates the bullish reversal scenario for an extension of the corrective decline sequence to expose the next medium-term support at US$2,955, and a break below it may see a further drop towards the US$2,833 long-term pivotal support area (also the key 200-day moving average).

Following RBA’s decision to cut the cash rate by 25bps to 3.85%, Governor Michele Bullock revealed in the post-meeting press conference that the Board briefly considered holding rates but quickly moved to debate between 25 and 50 basis point reductions.

Ultimately, the more measured 25bps cut was preferred, given that inflation is within target and unemployment remains resilient. Bullock emphasized that while easing was justified, "it doesn't rule out that we might need to take action in the future."

Bullock also noted that the Board views recent global trade developments as broadly "disinflationary" for Australia. However, she cautioned that risks remain tilted both ways.

"There is a risk to inflation on the upside, trade policies could lead to supply chain issues, which could raise prices for some imports, much as we saw during the pandemic," she emphasized.

Markets

The 30-yr bond yield at some point yesterday surged more than 13 bps, including last Friday’s late-session move, to 5.03%. Trump’s Big Beautiful but costly Bill getting shaped in the House only proved Moody’s point for its AAA-rating downgrade and added fuel to the fire. But the Treasury sell-off lured dip buyers into the arena and by the end of yesterday’s trading day we saw a full recovery of all losses – to the exact basis point. The symbolical 5% resistance area lives to fight another day but it’s clear fiscal sustainability as a market theme is again front-and-center. It’s another argument next to the developing trade story for the Fed not to rush into cuts. Both Bostic (Atlanta) and Williams (NY) yesterday stressed it could take well into or even after the summer before things have cleared up somewhat to allow for informed, data-based decisions. As US bonds found some footing, so did UK gilts. The UK is trapped in a similar tricky budget situation and yields, particularly long-term ones, shot up to 10 bps higher as well before paring gains to just 2.5 bps tops (30-yr). German yields followed the US intraday pattern, outperforming them along the way. Net daily changes eventually varied between flat (30-yr) and -1.2 bps (2-yr). The dust quickly settled on equity markets too. Wall Street gapped lower but recovered throughout the session. Both bonds and stocks fully erased their intraday losses but the dollar did not. EUR/USD rose to a 1.1288 high and closed at 1.124 compared to 1.116 at the open. The trade-weighted DXY came close to the 100 barrier. USD/JPY returned sub 145 with JPY extending gains this morning after Japan’s finance minister Kato is arranging a meeting with USTS Bessent to discuss FX. Japanese yields trade sharply higher. A poor 20-year Japanese bond sale this morning flings long-term rates up in the sky and ups the ante for next week’s 40-yr auction. The 30-year yield adds more than 13 (!) bps and smashes through the 3% to 3.11%. Since Japan began issuing 30-year bonds in 1999 yields have only been higher in 2000. The 3.13% hit back then is about to get tested. At the heart lie … fiscal risks. The topic will continue to draw attention all week as Trump’s bill gets discussed in the House and given the relatively light eco calendar, with the exception of Thursday’s PMIs. That should offer downside to US/core bond yields. In terms of market momentum, we could see some hesitation or consolidation after a recent push towards the levels seen in the aftermath of Liberation Day. EUR/USD remains trapped in a sideways trading range where 1.14 serves as an intermediate resistance area. Sterling hovers north of EUR/GBP 0.84. Yesterday’s announcement of a broad-ranging post-Brexit deal where defense lies at the center had limited impact. The UK releases CPI numbers tomorrow.

News & Views

The Reserve Bank of Australia (RBA) this morning cut its policy rate by 25 bps to 3.85%. The RBA said demand and supply are closer towards balance. Inflation continues to ease. Trimmed mean Q1 annual inflation (2.9%) for the first time since 2021 returned below 3.0% and headline inflation (2.4%) remained within the 2-3% target band. New forecasts indicated that headline inflation might drift back higher due to temporary factors, but underlying inflation would to stay around the mid-point of the 2-3% target. (International) uncertainty remains high and might have adverse effects on the economy. Even so, the RBA assess that domestic demand appears to have been recovering, that real household incomes have picked up and that the labour market remains relatively tight. Still businesses continue to report weakness in demand. The RBA expects GDP growth to pick up, but at a more gradual pace than initially expected (2025 2.1%; 2026 2.2%). The outlook for inflation also has been revised a little lower (trimmed mean EoY 2025 and 2026 2.6% from 2.7%). Markets expected a more hawkish assessment. The 3-y bond yield dropped 10 bps to 3.53%. Money markets see two more cuts this year with the next 25 bps step fully discounted for August. The Aussie dollar eases marginally (0.644), holding within the recent narrow range (0.6315/0.6515).

The head of the Swiss National Bank (SNB), Martin Schlegel, in a speech said that inflation in the country can turn negative in certain months this year. Y/Y inflation in the country printed at 0.0% in April. The SNB head pointed to a negative contribution from external factors. With giving guidance on next month’s policy meeting, Schlegel indicated that the interest rate is very important for the exchange rate. In this respect, the SNB according to Schlegel, is prepared to bring the interest rate into negative territory if required. Interest rates remain the main policy tool of the SNB, but FX interventions might also be put in place. Markets expected SNB to cut the policy rate from 0.25% to 0.0% in June. EUR/CHF, after a CHF rally early April, recently held a tight range between 0.93 and 0.945.

The People’s Bank of China (PBoC) and the Reserve Bank of Australia (RBA) lowered their interest rates today, hoping to tame and counter the negative impact of the global trade war on their economies and job markets. The moves were expected and received mixed reactions across stock markets.

The CSI 300 index is up by 0.62% at the time of writing, while the Hang Seng has jumped around 1.30%, boosted by CATL’s IPO, which went according to plan and led to a 14% surge in its Hong Kong debut. Meanwhile, the ASX is giving back earlier gains as trade headlines are turning sour. Remember, the US—unhappy with the pace of negotiations—announced last week that it would impose unilateral tariffs on trade partners before the end of the 90-day pause period. Trump insists that Apple manufacture its phones in the US and now wants the company to abandon its AI partnership with Alibaba for devices sold in China. This is another blow to Apple’s Chinese business. AI-powered systems could have helped reverse Apple’s falling market share in the country, and partnering with a local player made strategic sense given the severe restrictions on accessing data in China. Alas, it may no longer be possible. Apple, which pledged to invest up to $500 billion in the US, could now be pressured to spend that money on manufacturing infrastructure instead of innovation and R&D...

Meanwhile in China—despite the demographic and housing crises—technological advancements continue to challenge Western peers. Companies like Alibaba and Baidu are developing AI models; Huawei and SMIC are producing chips; and BYD, Xpeng, and Xiaomi are challenging Tesla globally by building powerful but more affordable EVs. Xiaomi announced that its new model, competing directly with Tesla’s Model Y, will launch this Thursday in China. Its share price is up 4% today and approaching all-time highs.

In summary: sentiment in Chinese tech is improving. Lower interest rates and ample fiscal support should help bolster this momentum. Investor appetite for US Big Tech remains strong, but current valuations could prove excessive if Trump’s trade war backfires—forcing companies to waste resources reorganizing supply chains or fight costly regulatory battles (I am thinking of a possible EU retaliation). These risks are not insignificant and could be avoided.

A Brexit breakthrough

Good news came from Europe, as the EU and the UK sealed their most comprehensive deal since Brexit and pledged ‘to discuss British access’ to Europe’s €150 billion defense fund. The Stoxx Europe Aerospace & Defence ETF soared 2% to a fresh high, while the Stoxx 600 eked out a small gain despite looming tariff concerns. The index has now recovered around 80% of its March–April losses and is approaching all-time highs and potentially overbought territory.

On the data front, yesterday’s CPI print confirmed an uptick in euro area’s April core inflation. However, that unwelcome development was somewhat offset by new EU Commission forecasts showing eurozone inflation could slow toward the 2% target by mid-year and average around 1.7% in 2026. This outlook should give the European Central Bank (ECB) enough room to keep rates in a sweet spot alongside easing energy prices and a possible resolution to the war in Ukraine.

The EURUSD rallied to 1.1288 yesterday and remains bid against a broadly softer US dollar, while German bonds continue to attract buyers seeking low-risk alternatives to US debt.

What rating cut?

Interestingly, markets rapidly shrugged off the US rating downgrade. The 10-year yield eased below 4.50%, and the 30-year fell back under the 5% threshold. Still, the broader narrative of declining confidence in US Treasuries and the US dollar remains intact. This opens a window of opportunity for investors looking beyond US markets—an exciting prospect for those seeking the next big destination.

On the Federal Reserve (Fed) front, New York Fed President Williams said ‘It’s not going to be that in June or July we’re going to understand what’s happening’ —emphasizing that it will take time to gather data and assess the situation. Atlanta Fed President Bostic echoed the cautious tone, saying he expects no more than one rate cut this year.

The S&P 500 reversed early-session losses to close slightly higher, but concerns remain: trade tensions, the Fed’s reluctance to provide support amid rising inflation expectations, and ongoing political uncertainty.

In corporate news, Nvidia announced that it will allow third-party chips to use its NVLink Fusion program and ‘connect their own third-party CPUs with Nvidia’s GPUs in AI data centers.’ The move aims to turn a competitive threat—of others building their own chips—into an opportunity to become the high-performance bridge everyone uses. Nvidia shares recovered early losses and closed above the $135 mark.

Elsewhere, Home Depot and Lowe’s earnings are in focus as investors complete the US consumer picture in the midst of trade turmoil. These companies remain heavily exposed to the trade war and may be forced to raise prices despite declining sales in order to protect their margins. A company like Home Depot has a net profit margin of around 9%, while Walmart operates closer to a 3% net profit margin. With tariffs ranging between 10% and 30%, price increases seem inevitable.

Higher prices mean higher inflation, limited Fed support, slower economic growth and – potentially – stagflation: a recipe for a deeper debt spiral and more financial pain.

In focus today

In the euro area, we will receive consumer confidence data for May, which will show how consumers have reacted to the improvements in trade talks between the US and China and following risk on sentiment in markets.

In Denmark, the government releases a new economic forecast, which according to media reports will show 3.0% GDP growth in 2025, which would imply quite weak q/q growth during the year. We also receive consumer confidence and flash Q1 GDP figures are being released. We anticipate a 0.5% q/q decline in GDP for Q1, following strong growth in 2024. However, there's high uncertainty due to unreliable real indicators for GDP growth, measured from the production side. While industrial production appears to have sharply decreased, the survey data may not accurately reflect current industry conditions.

Economic and market news

What happened overnight

China's central bank cut the 1-year and 5-year Loan Prime Rates by 10bp to 3.0% and 3.5% respectively, following the reverse repo rate which was lowered by 10bp on 6 May. These anticipated rate cuts aim to stimulate consumption and loan growth as the economy softens.

In Australia, the RBA cut it cash rate by 25bp to 3.85%, as expected, marking the second rate cut this year. This decision follows the return of underlying inflation back inside the RBA's target band.

What happened yesterday

Ukraine-Russia peace talks, following Trump's call with Putin, Trump stated that Russia and Ukraine would commence immediate negotiations aimed at achieving a ceasefire and ending the war, though the Kremlin cautioned the process would require time. Trump briefed Zelenskiy and EU leaders in a group call. European leaders agreed to intensify sanctions on Russia, while Trump opted not to introduce fresh sanctions.

In the euro area, the European Commission released its updated economic projections. It forecasts real GDP growth to be 0.9% y/y in 2025, down from November's estimate of 1.3% y/y. This revision is primarily due to increased tariffs and uncertainty stemming from recent changes in US trade policy. Next year, growth is expected to improve to 1.4% y/y. Inflation is projected at 2.1% y/y for 2025 and 1.7% in 2026. The 2026 inflation forecast has been reduced from 1.9% y/y aligning with ECB's December projections. This adjustment suggests the ECB might also lower its March forecast of 1.9% when the June projections are released, indicating a dovish stance given the similarity in their modelling frameworks.

Equities: Global equities ended higher yesterday, in what turned out to be a notable turnaround session. Early in the day, risk sentiment was soft, and we saw broad-based selling, particularly in US-linked assets. However, as the session progressed, sentiment reversed, and markets closed close to flat or slightly positive. This marked yet another day of gains in equities, continuing the positive streak we've seen over the past month. The S&P 500 is now nearly 20% above its recent lows just over a month ago. VIX ticked up slightly, while defensives outperformed cyclicals once again.

However, it is worth noting that this outperformance is happening in an up-market and comes on the heels of a strong month for cyclicals leading to P/E premium being back close to 30% again in cyclicals. In the past three sessions have seen consistent relative strength in defensives, but overall volatility remains anchored near historical norms, which is remarkable given the current level of political uncertainty. This likely reflects the resilience of the macro backdrop, which remains relatively strong. In the US yesterday Dow +0.32%, S&P 500 +0.09%, Nasdaq +0.02%, Russell 2000 (0.42%). Asian markets are mostly higher this morning after China cut rates, and there is some catch-up after yesterday's gains in Western markets. US equity futures are pointing slightly lower, while European futures are trading in positive territory.

FI&FX: This morning, we have made a slight change to our Fed forecast, now calling for the next 25bp cut in September (prev. June) but still maintaining our terminal rate view at 3-3.25%. As we pencil in quarterly rate cuts, the terminal rate will now be reached in September 2026. Market sentiment improved yesterday afternoon as the headwinds to US assets faded, and equities closed marginally in the green and 10y UST fell back almost to the same levels as before Moody's announcement on Friday. The USD remains on the backfoot however, with EURUSD lifting above 1.12 yesterday and our revised Fed call does not alter our EUR/USD outlook. We remain bearish USD and reiterate our 12M EUR/USD target of 1.20. We think the paid case in Norway has run a little too far relative to peers. Consequently, we yesterday booked profit on 3 of our short-end payer trades.

Daily Pivots: (S1) 192.86; (P) 193.47; (R1) 194.16; More...

Intraday bias in GBP/JPY stays neutral and more more consolidations could be seen below 196.38. Further rise is in favor as long as 190.22 support holds. On the upside, firm break of 195.95 will suggest that whole choppy decline from 199.79 has completed, and target this resistance next.

In the bigger picture, price actions from 208.09 are seen as a correction to rally from 123.94 (2020 low). Strong support should be seen from 38.2% retracement of 123.94 to 208.09 at 175.94 to contain downside. However, sustained break of 175.94 will bring deeper fall even still as a correction.

Daily Pivots: (S1) 162.17; (P) 162.78; (R1) 163.42; More...

Range trading continues in EUR/JPY and intraday bias remains neutral. Further rally is in favor as long as 161.57 support holds. Break of 165.19 will resume the rise from 154.77 to 166.67 resistance. However, firm break of 161.57 will indicate near term reversal, and turn bias back to the downside.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). Strong support should be seen from 38.2% retracement of 114.42 to 175.41 at 152.11 to contain downside. However, sustained break of 152.11 will bring deeper fall even still as a correction.

Daily Pivots: (S1) 0.8402; (P) 0.8415; (R1) 0.8426; More...

Despite some loss of momentum, further fall is still in favor in EUR/GBP with 0.8439 minor resistance holds. Current decline from 0.8737 should target 0.8221/8239 support zone. On the upside, above 0.8439 will turn bias back to the upside for stronger rebound instead.

In the bigger picture, current development suggests that price actions from 0.8221 medium term bottom are merely forming a corrective pattern. However, there is no clear momentum to break through 0.8201 key support (2022 low) yet. Hence, range trading is expected between 0.8221/8737 for now.

Daily Pivots: (S1) 1.7359; (P) 1.7439; (R1) 1.7488; More...

Intraday bias in EUR/AUD stays neutral for the moment. On the upside, firm break of 1.7628 resistance will suggest that fall from 1.8554 as completed as a correction, and retain larger bullishness. Intraday bias will be back on the upside for stronger rebound. However, below 1.7245 will resume the fall to 61.8% retracement of 1.5963 to 1.8554 at 1.6953.

In the bigger picture, as long as 1.7062 resistance turned support (2023 high) holds, up trend from 1.4281 (2022 low) should still be in progress. Break of 1.8554 will target 100% projection of 1.4281 to 1.7062 from 1.5963 at 1.8744. However, sustained break of 1.7062 will confirm medium term topping and bring deeper fall back to 1.5963 support.

Daily Pivots: (S1) 0.9348; (P) 0.9373; (R1) 0.9409; More....

EUR/CHF is still bounded in sideway trading and intraday bias stays neutral. Price actions from 0.9218 are seen as either a corrective move or the third leg of the pattern from 0.9204. On the upside, break of 0.9419 will resume the rise from 0.9218 through 0.9445 resistance. However, break of 0.9296 support will bring retest of 0.9218 low.

In the bigger picture, prior rejection by long-term falling channel resistance (now at 0.9548) retains medium term bearishness. That is, down trend from 1.2004 (2018 high) is still in progress. Firm break of 0.9204 (2024 low) will confirm resumption. This will remain the favored case as long as 0.9660 resistance holds.