Gold (XAU/USD) steadied just below the $3,350 mark during early European trading on Thursday, recovering slightly from earlier losses that pushed the precious metal to a one-week low. Investor sentiment remains cautious following the US Federal Reserve’s revised outlook, which scaled back its projection for interest rate cuts in 2026 and 2027—an adjustment that has bolstered the US Dollar and dampened demand for non-yielding assets like gold.
The hawkish signal from the Fed, which held rates steady in its latest policy meeting, is seen as a key factor weighing on gold. Officials now expect just one 25-basis-point rate cut in both 2026 and 2027, down from earlier projections, due to lingering inflation concerns. This, paired with global risk aversion and a stronger dollar, has kept gold under pressure.
Geopolitical Risks Offer Some Support
Despite these headwinds, geopolitical uncertainty in the Middle East continues to lend gold some support as a safe-haven asset. The aerial conflict between Iran and Israel has now entered its eighth day, with speculation mounting over potential US involvement. According to the US Senate Intelligence Committee Chair, former President Donald Trump has signaled he may offer Iran a final opportunity to negotiate on its nuclear program, delaying any possible military response for up to two weeks. This geopolitical backdrop raises the threat of a wider regional conflict, which may keep gold from falling sharply.
Market Sentiment Remains Fragile Amid Tariff Threats
Adding to the volatility, Trump’s recent comments about imposing tariffs on the pharmaceutical sector have stirred fresh concerns. The approach of the July 9 deadline for broad “liberation day” tariffs heightens investor anxiety, keeping markets on edge. The uncertainty continues to underpin gold’s appeal, even as equity markets in Europe trend upward.
USD Pullback Could Benefit Gold
While the US Dollar recently hit a one-week high following the Fed’s policy announcement, it has since started to pull back slightly. A weaker dollar often makes gold more attractive to foreign buyers, potentially setting the stage for some dip-buying activity as the weekend approaches.
Technical Outlook: Key Levels to Watch
From a technical standpoint, gold’s intraday drop pushed prices below the 100-period Simple Moving Average (SMA), nearing critical support at the lower end of a short-term ascending channel. Momentum indicators on the hourly chart suggest growing downside pressure. If selling continues, the XAU/USD pair could slide further toward the $3,323–$3,322 zone, with a potential test of the $3,300 psychological level.
On the upside, immediate resistance lies in the $3,374–$3,375 range, followed by a key barrier at $3,400. A break above this level could open the door for a push toward $3,434–$3,435, and potentially the $3,451–$3,452 zone—levels last seen at Monday’s two-month high. Sustained buying could bring the all-time high near the $3,500 mark back into play.
Outlook: Rangebound but Bullish Bias Possible
While bearish sentiment currently prevails, the broader fundamental landscape—marked by geopolitical risks and tariff uncertainties—could favor gold in the near term. Unless there is a decisive break below key support levels, the longer-term bias may still lean bullish, especially if market volatility spikes or the dollar weakens further.
