Gold Price Dips on Trade Optimism but Resists Bets on Fed Cut and Geopolitical Threats
Gold prices began the week on a weaker footing, dragged by weakening safe-haven demand as US-EU trade optimism picked up following President Trump’s postponement of planned tariffs. Still, the negative seems contained as fears about the US fiscal situation, continued geopolitical tensions in the Middle East and Ukraine, and increasing Federal Reserve rate cut expectations continue to underpin the yellow metal. Although the recent decline, technicals and overall fundamentals indicate any drop is likely to be considered a buying opportunity, with major support at $3,325 and major resistance at $3,400–$3,500 levels. KEY LOOKOUTS • Investors will be looking closely at Wednesday’s FOMC meeting minutes for hints regarding the timing and magnitude of expected interest rate reductions, which can play a huge role in determining the price of gold. • All-important data releases such as Durable Goods Orders (Wednesday), Preliminary GDP (Thursday), and the PCE Price Index (Friday) will give more indication of the health of the US economy and influence market sentiment. • Rising tensions in the Middle East and Ukraine, and whatever fresh sanctions or reactions from major powers, will continue to be key drivers of safe-haven appetite for gold. • The $3,325–$3,324 trendline is support, with a break lower potentially challenging $3,300 and $3,283. On the upside, breaking above $3,366 could set the stage for $3,400, $3,430, and perhaps the all-time high at $3,500. Gold prices continue in the spotlight as markets await economic indicators and geopolitical events. This week, the spotlight will be on the release of the FOMC minutes and significant US data such as Durable Goods Orders, GDP, and the PCE Price Index, which have the potential to influence expectations of future Fed rate cuts. Meanwhile, ongoing worries about the US fiscal deficit and rising geopolitical tensions—specifically in Ukraine and the Middle East—are set to maintain safe-haven demand. From a technical perspective, gold is clinging to support around $3,325, and a move above $3,366 could set the stage for a break towards the $3,400–$3,500 zone, maintaining bullish strength. Gold prices are supported by prospects of Fed rate cuts and ongoing geopolitical tensions despite pressure from weakening safe-haven demand. Gold prices will be watched for new directions this week by traders as they await key US data and FOMC minutes. A break above $3,366 can propel towards the $3,400–$3,500 zone. • Gold prices softened slightly as optimism in trade alleviated safe-haven demand after President Trump postponed EU tariffs. • Support is in place as Fed rate cut expectations continue to rise on weak US inflation and slowing growth. • Geopolitical uncertainty from the Russia-Ukraine conflict and Middle East tensions continue to support gold demand. • US fiscal worries escalate as Trump’s budget bill threatens to exacerbate the budget deficit, further enhancing gold’s appeal as a hedge. • The US Dollar falls, reaching a new monthly low, supporting gold prices by making foreign purchases less expensive. • FOMC minutes and economic data from the US such as GDP and PCE Index are major events this week that will determine the direction of gold. • Technicals indicate support at $3,325–$3,324, and resistance at $3,366; a breakout can reach the $3,400–$3,500 levels. Gold prices began the week on weaker footing as declining trade tensions between the US and the European Union lessened the urgent demand for safe-haven assets. President Trump’s announcement to postpone the imposition of a 50% tariff on the EU boosted optimism across global markets, leading investors to take on a more risk-on stance. Yet, that optimism is moderated by ongoing fears of the US fiscal situation, after the passing of a huge budget bill that has the potential to greatly expand the federal deficit in the years ahead. XAU/USD DAILY PRICE CHART CHART SOURCE: TradingView Aside from fiscal concerns, geopolitical risks remain the support for gold’s attractiveness. The Ukraine war, combined with elevated Middle East tensions, keeps investors on edge and underpins demand for safe-haven assets such as gold. In addition, expectations that the Federal Reserve will reduce interest rates later this year—fuelled by disappointing inflation readings and a slowing growth picture—contribute to the bullish tone around the metal. With global uncertainty persisting, gold continues to be a popular hedge against economic turmoil and political shocks. TECHNICAL ANALYSIS Gold is still underpinned by a wider bullish pattern, and recent price action continues to look resilient above important trendline levels. In spite of a minor pullback, the metal continues to be traded in an uptrend channel, reflecting continued buying interest on dips. Momentum indicators on the hourly and daily charts continue to reflect a positive bias, which indicates that any downside is going to be contained. So long as gold remains above near-term supports, the current trend benefits buyers with scope for continuation higher if bull sentiment advances. FORECAST Prices of gold can continue higher in the next sessions with support from dovish expectations over monetary policy by the Federal Reserve. With markets already factoring in several rate reductions this year because of dampening inflation and a slow economic environment, falling interest rates may further erode the strength of the US Dollar and make non-yielding assets such as gold more attractive. Moreover, persistent geopolitical tensions as well as fears regarding US fiscal health are set to maintain strong investor appetite for safe-haven assets. If bullishness prevails, gold may revisit key psychological points, with room to test old highs. On the bearish side, gold may come under pressure if trade sentiment continues to improve or if near-term US macroeconomic data surprises to the upside, reducing the need for rate cuts. Any indications of resilience in inflation or better-than-forecast economic data would lead to a more hawkish stance by the Fed, favoring the US Dollar and making gold less appealing. Although overall fundamentals remain generally favorable, any short-term change could come from a fleeting shift in risk appetite or profit-taking if support levels are broken.
