In a powerful market rally, gold prices surged above $3,373 per ounce on Thursday, lifted by a weakening U.S. dollar, cooling inflation, and renewed appetite for safe-haven assets amid global geopolitical tensions.
The U.S. Dollar Index fell to its lowest level in nearly two months following the release of the May Consumer Price Index (CPI), which showed a monthly increase of just 0.1%. On an annual basis, inflation eased to 2.4%, falling short of market expectations and reinforcing speculation that the Federal Reserve may cut interest rates later this year.
Analysts Point to Bullish Breakout
Kelvin Wong, senior market analyst at OANDA, said the dollar’s slide served as a “strong bullish catalyst” for gold. He also highlighted that a key technical breakout above the $3,346 level triggered automated buying, propelling prices higher.
Markets are now pricing in approximately 50 basis points of rate cuts by the end of 2025, with traders closely watching Thursday’s Producer Price Index (PPI) release for additional clues on inflation trends.
Adding to the bullish sentiment, former President Donald Trump urged the Fed to deliver “significant rate cuts” in the wake of the soft CPI report. Combined with the Fed’s dovish posture, these calls have strengthened gold’s upward momentum.
Geopolitical Uncertainty Adds to Safe-Haven Demand
Beyond economic indicators, escalating geopolitical tensions have also fueled gold’s rally. Trump announced the withdrawal of U.S. personnel from parts of the Middle East, citing rising security threats linked to Iran. This development heightened investor concerns and boosted demand for gold as a safe-haven asset.
Meanwhile, a proposed framework to reduce trade tensions between the U.S. and China—confirmed by both Trump and Chinese officials—provided some relief to broader financial markets. However, it failed to dampen gold’s appeal, as concerns about a potential new round of U.S. tariffs on July 8 continue to loom.
Key Drivers Behind the Gold Rally
- Weak U.S. dollar: Makes gold more affordable for international buyers.
- Cooling inflation: Boosts expectations for Fed rate cuts.
- Middle East tensions: Increases demand for safe-haven assets.
- Trade talks: Eases market volatility but doesn’t derail gold momentum.
Technical Outlook: Bullish Momentum Intact
Gold (XAU/USD) is currently testing the $3,375 resistance level, having reclaimed the 50-EMA on the 2-hour chart. The bullish trend remains intact, supported by a series of higher lows and an upward-sloping trendline traced back to the May 29 low.
Technical indicators suggest continued upward momentum. The Moving Average Convergence Divergence (MACD) indicator has turned positive, with a bullish crossover and rising histogram bars signaling sustained buying pressure.
If gold breaks decisively above $3,375, analysts expect a potential move toward $3,405. A continued push could even drive prices to $3,434, provided that bullish momentum remains strong.
Outlook: Gold Bulls Remain in Control
With dovish signals from the Fed, growing geopolitical instability, and technical momentum aligning in favor of buyers, gold remains on a solid upward trajectory. Investors will closely monitor upcoming inflation data and global policy shifts as potential catalysts for the next leg of the rally.
