Gold prices (XAU/USD) retreated from nearly a four-week high in early European trading on Tuesday, sliding to a daily low near $3,351. The decline follows a modest rebound in the U.S. Dollar (USD) and an improved global risk sentiment, both of which weighed on demand for the safe-haven metal.
Despite the pullback, broader concerns over U.S.-China trade relations, rising geopolitical risks, and the uncertain U.S. fiscal outlook continue to provide a supportive backdrop for gold, helping limit deeper losses.
Dollar Recovery and Risk-On Mood Pressure Gold
The U.S. Dollar extended its intraday gains after bouncing from a six-week low, prompting profit-taking in gold following Monday’s rally. Meanwhile, Asian equity markets gained on the back of a strong Wall Street session, dampening appetite for safe-haven assets.
Still, investor caution lingered amid fresh trade tensions. Over the weekend, former President Donald Trump accused China of violating a preliminary trade agreement, reviving fears of another tariff-driven standoff between the world’s two largest economies. Last week, Trump announced a tariff hike on steel imports from 25% to 50%, and the administration is now reportedly pressing trade partners to finalize proposals ahead of a July 8 deadline for reciprocal measures.
Geopolitical Risks Add to Market Caution
On the geopolitical front, peace talks between Ukrainian and Russian officials in Istanbul on Monday failed to yield significant progress. Ukrainian President Volodymyr Zelenskyy claimed success in recent drone strikes and warned of continued military actions if Russia does not retreat—adding to global uncertainty.
Such developments have heightened geopolitical tensions, which may continue to underpin safe-haven demand for gold, even as broader market sentiment appears relatively upbeat.
Fed Policy Outlook: A Key Driver Ahead
Markets are also digesting recent commentary from Federal Reserve officials, which has reinforced expectations for interest rate cuts in 2025. Fed Governor Christopher Waller noted that easing remains possible despite potential inflationary effects from tariffs. Chicago Fed President Austan Goolsbee echoed this view, saying rate cuts could come over the next 12–18 months. However, Dallas Fed President Lorie Logan urged caution, suggesting the Fed could remain on hold if inflation expectations persist.
These mixed signals have fueled speculation that the Fed will adopt a dovish stance in 2025—potentially benefiting gold, which yields no interest and tends to gain when rates fall.
Concerns over the U.S. fiscal trajectory, especially with rising deficits and debt levels, may also rekindle “sell America” sentiment, adding further pressure on the greenback and supporting gold prices in the medium term.
Technical Outlook: Key Support and Resistance Levels in Focus
Technically, gold’s recent breakout above the $3,324–$3,326 resistance zone and strength beyond $3,355 signaled bullish momentum. Indicators on both daily and hourly charts remain in positive territory, suggesting the broader trend remains upward.
Any dip below $3,355 is likely to attract buyers, with strong support expected at the $3,326–$3,324 zone. A deeper decline could see gold test the $3,300 level and the horizontal support at $3,286–$3,285.
To the upside, bulls may wait for a decisive break above the psychological $3,400 mark. Sustained strength could open the door for a move toward $3,430–$3,432, and potentially a retest of April’s record high near $3,500.
Looking Ahead
Traders now shift focus to Tuesday’s release of the U.S. JOLTS Job Openings report, as well as upcoming speeches from Federal Open Market Committee (FOMC) members. However, the spotlight remains on Friday’s key Nonfarm Payrolls (NFP) report, which could provide clearer direction for both the USD and gold in the days ahead.
