Gold Trades Sideways Amid Diverging Market Forces.
The gold market started the week on a cautious note, with XAUUSD prices trading in a tight range during the Asian session on Tuesday, reflecting market indecision. The safe-haven asset struggled to extend its recent gains and hovered below the two-week high, as traders assessed a mixture of bullish and bearish influences.
On the one hand, optimism stemming from US President Donald Trump’s decision to delay tariffs on the European Union temporarily suppressed demand for gold, a traditional safe-haven. However, that optimism tempered by continued concerns over US fiscal health, dovish expectations for Federal Reserve policy, and growing geopolitical tensions all of which continue to lend underlying support to bullion prices.
Trump Delays EU Tariffs but Trade Uncertainty Lingers
A notable development over the weekend came from Washington, where President Trump agreed to delay the proposed 50% tariffs on the EU, originally slated to begin on June 1, to July 9. This announcement followed a direct conversation with EU Commission President Ursula von der Leyen, during which both sides expressed intent to accelerate trade negotiations.
While the temporary reprieve offered modest relief to equity markets and risk-sensitive assets, it failed to significantly dampen demand for gold. That’s because investors remain skeptical about the long-term stability of Trump’s trade agenda, especially amid unresolved tensions with China and his increasingly protectionist rhetoric.
US Fiscal Concerns: “Big, Beautiful Bill” Fuels Deficit Fears
In domestic policy, President Trump’s sweeping new fiscal package dubbed the “Big, Beautiful Bill” continues to fuel fears of ballooning deficits. The bill, pass by the House of Representatives and now headed to the Senate, expected to add $4 trillion to the federal primary deficit over the next decade.
This massive spending package, combined with prior tax cuts and an already high debt burden, has raised red flags among investors and economists. The growing deficit perceived as a structural weakness in the US economy, prompting a bearish bias on the US Dollar, which in turn benefits gold by making it cheaper for foreign buyers.
Fed Rate Cut Bets Keep USD Under Pressure
Gold’s allure has also been reinforced by market expectations that the Federal Reserve will pivot to a more accommodative stance in the second half of 2025. Following signs of easing inflation, traders are increasingly pricing in the possibility of two 25 basis point rate cuts by year-end.
The combination of falling inflationary pressures and slower economic momentum has pushed the USD to its lowest level since April 22, bolstering the non-yielding metal’s appeal. With rate cuts likely to reduce real yields further, gold stands to gain as a more attractive store of value.
Geopolitical Tensions Support Safe-Haven Demand
Beyond domestic US politics and policy, heightened geopolitical risks continue to provide a solid floor for gold prices. Russia’s most intense aerial assault on Ukraine since the war began in 2022 has reignited fears of a broader regional conflict. In response, Trump has threatened new sanctions against Moscow, calling President Putin “crazy” and reaffirming the US’s commitment to Ukraine.
Simultaneously, Israel’s ongoing military operations in Gaza have kept the Middle East on edge, further complicating the global risk environment. These simmering geopolitical flashpoints help maintain investor demand for gold, even as some risk sentiment improves elsewhere.
Market Participants Await US Data and Fed Minutes
Looking ahead, gold traders expected to tread carefully as several high-impact US data releases and policy signals loom large on the horizon. Tuesday’s economic calendar features Durable Goods Orders and Consumer Confidence data from the Conference Board. While these may offer short-term trading cues, the spotlight remains firmly on Wednesday’s FOMC meeting minutes.
Investors will closely parse the minutes for any insight into the Fed’s internal deliberations on rate cuts, inflation, and economic risks. Any dovish tilt could trigger renewed downward pressure on the USD and lift gold prices, while a hawkish surprise may cap further gains.
The week concludes with two more crucial releases the Preliminary Q1 GDP data on Thursday and the PCE Price Index on Friday, which is the Fed’s preferred inflation gauge. These data points will help markets determine whether the Fed’s pivot to easing is warranted or premature.
Technical Outlook: Gold Bulls Eye $2,370 But Momentum Lags
From a technical perspective, XAUUSD remains in a consolidative phase, trading below the $2,370 resistance area, which marked the high from mid-May. Bulls appear reluctant to push the price higher without fresh catalysts, especially amid the drop in immediate safe-haven demand.
Support is seen near the $2,325-$2,330 zone, while a break below could open the door toward the $2,300 psychological level. Conversely, a sustained move above $2,370 may target the next upside barrier around $2,400, followed by the all-time high territory beyond $2,430.
While the overall bullish structure remains intact, the lack of momentum and reduced geopolitical panic may cap gains in the near term, unless fresh triggers emerge from Fed policy shifts or unexpected global developments.
Bottom Line
Gold prices currently caught in a tug-of-war between improving market sentiment on trade diplomacy and underlying macroeconomic and geopolitical uncertainties. While the delay in US-EU tariffs reduced immediate safe-haven demand, concerns over US fiscal sustainability, Fed easing prospects, and escalating global tensions continue to support the yellow metal.
In the coming days, markets will look to key US economic data and Fed commentary for direction. For now, the bulls remain cautiously optimistic, but sustained upside for gold may require a clearer signal from the Fed or a spike in geopolitical risk.
https://voiceoftraders.com/analysis/eurusd-wavers-as-us-dollar-recovers-ground-amid-tariff-turmoil
