Gold prices (XAU/USD) hovered below the $3,300 level during early Friday’s European session as investors took a cautious stance ahead of key US inflation data. The US dollar regained some strength amid repositioning trades, putting pressure on gold demand. However, several factors limited aggressive selling and prevented significant declines in the precious metal.
A federal appeals court on Thursday temporarily reinstated former President Donald Trump’s tariffs, reversing a previous trade court ruling that had blocked them. This move added market uncertainty and weighed on investor sentiment. At the same time, ongoing geopolitical tensions—including the prolonged Russia-Ukraine conflict and unrest in the Middle East—continued to support gold’s safe-haven appeal. Additionally, expectations of future Federal Reserve rate cuts capped the US dollar’s gains, offering some tailwind to gold prices.
Market Movers: Gold Faces Headwinds Amid Modest Dollar Strength
The US dollar’s sharp pullback overnight failed to sustain momentum as traders remained cautious before the release of Friday’s crucial US Personal Consumption Expenditure (PCE) Price Index.
The legal twists around Trump’s tariffs also kept markets on edge. On Thursday, a federal appeals court reinstated the tariffs, after a trade court had declared them illegal just a day earlier. Meanwhile, the Wall Street Journal reported that the Trump administration is exploring a law permitting tariffs up to 15% for 150 days.
On the geopolitical front, Kremlin spokesman Dmitry Peskov confirmed Russia had received a response from Ukraine regarding a proposed peace talks meeting in Istanbul next week. In the US, White House spokeswoman Karoline Leavitt said Israel had accepted a US ceasefire proposal, but Hamas rejected the terms, keeping tensions high.
Fed’s Rate-Cut Expectations and Economic Outlook
Traders anticipate the Federal Reserve may cut interest rates twice by 25 basis points each before the end of the year to support the economy. However, the May FOMC minutes released Wednesday showed a cautious “wait-and-see” approach amid uncertainties about trade policies and economic growth.
Chicago Fed President Austan Goolsbee noted that interest rates might drop if tariffs are resolved. San Francisco Fed President Mary Daly indicated two rate cuts could make sense if inflation declines and the labor market remains strong, though risks remain significant. Dallas Fed President Lorie Logan emphasized the Fed’s readiness to respond as economic conditions evolve.
Fed Chair Jerome Powell, who met with President Biden on Thursday, reiterated that monetary policy decisions will depend on incoming US economic data. Friday’s inflation report will therefore be pivotal in shaping expectations around the Fed’s rate-cut trajectory, influencing the US dollar and gold prices.
Technical Outlook: Gold at a Crucial Juncture
Technically, gold’s inability to break above the $3,325-$3,326 resistance zone and its drop below $3,300 favors bears in the near term. Indicators on the 4-hour chart point toward further downside, with support seen at $3,280. A decisive break below this could open the door for a move toward the overnight low near $3,245. Falling below that level may trigger deeper losses and test the $3,200 psychological support.
On the upside, the $3,325-$3,326 range remains a key barrier, followed by resistance around $3,345-$3,350. Sustained gains above these levels could negate the bearish outlook and spark short-covering, potentially pushing gold back toward $3,400 and possibly further to $3,432-$3,434.
