Gold prices (XAU/USD) recovered from an early slide in the European session to hover around the $3,338 level, just shy of a one-week high reached earlier this Wednesday. The initial market optimism sparked by positive developments in the US-China trade negotiations proved short-lived after President Donald Trump issued new tariff threats. Meanwhile, escalating geopolitical tensions in the Middle East have increased demand for safe-haven assets like gold, counterbalancing the risk appetite for equities.
The US Dollar (USD) remains subdued, struggling to sustain a modest intraday rebound and sitting near its lowest point since April 22. This weakness is driven by growing expectations that the Federal Reserve will adopt a dovish stance, possibly restarting interest rate cuts as early as September. The recent US consumer inflation data, released Wednesday, showed a slower-than-expected rise in prices, bolstering the case for monetary easing and supporting non-yielding gold prices by limiting the US Dollar’s strength.
Market Movers and Key Developments
President Trump intensified trade uncertainties on Wednesday by announcing plans to impose unilateral tariffs and notify trading partners within two weeks, undermining recent optimism from US-China trade talks held in London.
In the Middle East, security concerns escalated as the US ordered some personnel to leave its Baghdad embassy and allowed military families to depart voluntarily amid rising threats. This followed a warning from Iran’s Defence Minister Aziz Nasirzadeh, who threatened attacks on US bases should conflict erupt over Iran’s nuclear program.
Meanwhile, Russia escalated its military campaign in Ukraine, claiming recent bombardments were retaliation for Ukrainian attacks. A fresh wave of drone strikes hit Kharkiv, Ukraine’s second-largest city, early Thursday, keeping geopolitical tensions high and supporting gold’s safe-haven appeal.
Economic Data and Market Sentiment
On the economic front, the US Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 2.4% year-over-year in May, below the expected 2.5%, but slightly up from April’s 2.3%. The core CPI, excluding food and energy, held steady at a 2.8% annual increase, matching the previous month. These figures contributed to traders pricing in a roughly 70% probability of a Federal Reserve rate cut by September, further pressuring the US Dollar.
Investors now await Thursday’s key US economic reports, including the Producer Price Index (PPI) and Weekly Initial Jobless Claims, which could provide fresh signals on inflation and labor market health. However, the overall fundamental outlook suggests a favorable environment for gold to continue climbing.
Technical Outlook: Gold Eyes $3,400 and Beyond
Technically, gold’s recent rebound from the 200-period Simple Moving Average (SMA) and its break above the $3,348–$3,350 resistance zone support a bullish near-term outlook. Positive momentum indicators on both daily and hourly charts reinforce expectations for further gains, potentially pushing gold toward the $3,400 mark.
If buying momentum persists, gold could extend its advance to the $3,430–$3,435 range, setting the stage for a retest of the all-time high near $3,500, last reached in April.
On the downside, the $3,348–$3,350 level has shifted from resistance to immediate support. Any dips toward the $3,322–$3,323 area may attract buyers, helping limit losses near the $3,300 psychological level and the 200-period SMA on the 4-hour chart. Should gold break below this pivotal support, the near-term trend could turn bearish, inviting further selling pressure.
Conclusion
Gold’s price action reflects a complex interplay of geopolitical tensions, trade uncertainties, and shifting Fed expectations. Despite intraday volatility, the precious metal remains on track to reclaim key resistance levels, buoyed by safe-haven demand and the prospect of easing US monetary policy. Traders will closely monitor upcoming economic data and geopolitical developments for cues on gold’s next move.
