Market Outlook by Zeynel Balcı: Gold Pullback, Market Momentum and the Delicate US-China Balance

Gold prices have recently entered a phase of correction, primarily due to profit-taking and a slight easing of geopolitical tensions. The truce in the US-China trade war has been a key driver behind the pullback. However, this decline is widely interpreted as a short-term technical correction rather than a reversal of the long-term uptrend.

Gold Enters Correction Zone: Key Support Levels Ahead

In the short term, $3,120–$3,100 per ounce and ₺3,850–₺3,900 per gram are considered critical support levels for gold. If these thresholds hold, the precious metal may resume its upward momentum. Since the beginning of 2025, gram gold in Turkish lira terms has appreciated by 34%, while ounce gold has gained 22%. Considering Turkey’s official inflation (CPI) rate of 13.3% over the first four months of the year, gold continues to deliver real returns, beating inflation once again.

What’s Driving the Decline?

The recent correction in gold prices can be attributed to several factors: postponed expectations for a rate cut by the US Federal Reserve, moderate appreciation in the US dollar, progress in US-China trade talks, de-escalation of the India-Pakistan standoff, and new rounds of Russia-Ukraine peace negotiations. These developments have eased global risk perception, thereby weakening demand for gold as a safe haven.

The Bigger Picture: Long-Term Outlook Still Positive

Despite recent fluctuations, the medium- and long-term uptrend in gold remains intact. Volatility in the short term is likely to continue, especially given the sensitivity of the markets to geopolitical and economic headlines. Should the US-China trade dispute flare up again or Russia-Ukraine talks collapse, gold could once more be in high demand as a hedge against uncertainty. Meanwhile, the unpredictable nature of Donald Trump’s foreign policy adds another layer of volatility to market projections.

Foreign Inflows Show Upturn in Confidence

The Turkish Central Bank’s latest weekly data show encouraging signs. Foreign investors have maintained their buying streak in Turkish equities for the fourth consecutive week. In the week ending May 9, foreign investors purchased $102 million in stocks and $933 million in government bonds. Gross reserves at the Central Bank rose by $5.8 billion to reach $144.3 billion, while net reserves excluding swaps increased to $18.1 billion.

Additionally, domestic residents’ foreign currency deposits dropped by $382 million, falling to $193.1 billion. Deposits in FX-protected savings accounts also declined to ₺625 billion. These movements suggest that de-dollarization is gradually gaining traction, marking partial recovery from the financial turbulence that began in mid-March.

Borsa Istanbul Holds Gains, Watch Resistance Levels

The rebound in Borsa Istanbul continues, albeit with some resistance selling near key levels. The first supports are located at 9,500–9,420, with secondary support at 9,100–9,030. To maintain momentum, the index needs to breach resistance at 9,770–9,830. If this happens, the next targets could be 10,000 and 10,380. While upward momentum is present, investors should remain cautious of pullbacks near resistance zones.

US-China Talks Remain the Key Market Narrative

A temporary pause in the tariff war has boosted market sentiment. However, some observers caution that optimism may be premature and stress the need for more clarity on tariff policies. Speculation persists that tariffs could be lowered from 60% to 30%, but no official confirmation has been made.

Trump’s Gulf Visit and Billion-Dollar Deals

Donald Trump’s recent visit to Saudi Arabia, Qatar, and the UAE yielded multi-trillion-dollar agreements spanning aviation, AI, and defense industries. April’s US budget surplus of $258 billion was also attributed to increased tax and customs revenue, according to official reports.

Fed Expectations Shift with Powell’s Guidance

US bond yields have risen as markets revise their expectations of Federal Reserve rate cuts. The Fed is now expected to lower rates by a total of 50 basis points across two moves in 2025. Fed Chair Jerome Powell emphasized efforts to “reduce uncertainty and improve transparency” in a recent address. JPMorgan CEO Jamie Dimon warned that despite easing trade tensions, the risk of recession in the US still lingers.

Key Global Market Indicators

As of this week:

• US 10-year Treasury yield: 4.42%

• EUR/USD exchange rate: 1.1165

• Dollar index: 101.09

• Gold price per ounce: $3,201

• Silver: $32.27

• Brent crude oil: $64.92

While gold remains a resilient hedge against inflation and geopolitical risk, the market continues to watch for technical corrections and developments in global diplomacy. Investors are advised to stay cautious but engaged, particularly amid continued uncertainty in US-China trade talks and US monetary policy.

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