Gold (XAUUSD) prices slipped slightly during early European trading on Tuesday but failed to attract aggressive sellers as market forces pushed in opposite directions. The yellow metal remains trapped in a tight consolidation range, reflecting traders’ hesitation amid rising geopolitical and economic risks.
The conflict between Fed policy expectations and global trade fears has left gold in a state of limbo. The Fed is expected to maintain a hawkish hold amid signs that President Trump’s latest tariffs will fuel inflation, reducing the likelihood of a July rate cut. On the other hand, risk-off sentiment, driven by fresh trade threats and escalating tensions with BRICS-aligned nations, is providing a floor under gold.
Trump Extends Tariff Deadline, Expands Target List to BRICS Allies
The most significant geopolitical development driving market volatility came from Washington. President Donald Trump announced a 25% tariff on a new basket of goods, primarily targeting imports from Asian and African countries. In a more aggressive move, Trump warned that any nation aligning with BRICS anti-American policies would face an additional 10% tariff.
This extension of the tariff war injects fresh uncertainty into the global trade environment, spooking investors and weighing on risk assets. While the official tariff implementation date is delayed until August 1, the uncertainty it brings is already affecting sentiment in currency, commodity, and equity markets.
Fed Expected to Stay on Hold Tariff Inflation Shifts the Narrative
Initially, soft inflation expectations and global growth concerns had investors pricing in at least one Fed rate cut in 2025. However, Trump’s tariff moves are reshaping the inflation outlook in the US. With higher import costs likely pushing consumer prices upward, the Federal Reserve may be forced to maintain higher interest rates longer than previously expected.
Monday’s strong US Dollar performance, which lifted the DXY to a near two-week high, was largely driven by this revised outlook. Gold, a non-yielding asset, typically struggles in a high-rate environment. But on Tuesday, the USD saw some renewed selling pressure, offering temporary relief to gold bulls.
Geopolitical Risks and Fiscal Concerns Limit USD Upside
Despite Monday’s Dollar strength, the greenback struggled to hold gains as concerns about the economic impact of new tariffs and rising US fiscal instability created a drag on sentiment. Investors are becoming increasingly wary that the cost of protectionist policies could outweigh the benefits, especially as global growth shows signs of slowing.
Additionally, continued geopolitical instability—including rising tensions in the Middle East, and unrest in parts of Africa and Asia—reinforces gold’s role as a safe-haven asset. These factors limit the potential for a deeper gold selloff, even in the face of Fed hawkishness.
Global Equities Sink, Risk-Off Mood Buoys Gold Safe-Haven Status
The selloff in global equities further validates the risk-off mood. Major Asian indices closed sharply lower, while European stocks opened in the red, reflecting concerns about global economic fragmentation. While gold prices have not surged in response, they are finding support as investors seek capital preservation amid rising uncertainty.
Unlike past rallies, gold’s upside is currently being capped by the Fed’s hawkish lean. Yet, demand for safety is still present, especially among long-term investors, central banks, and ETF flows, which have held steady despite spot price fluctuations.
No Key Data Ahead of FOMC Minutes Market in Wait-and-See Mode
With no significant US economic data scheduled for Tuesday, attention now shifts to the Federal Open Market Committee (FOMC) minutes, due Wednesday. Traders are looking for further clues on rate direction, inflation outlook, and whether Fed members are factoring in the impact of recent tariff announcements.
The minutes may provide insight into the Fed’s internal debate: whether inflation from tariffs is transitory or structural, and how the labor market’s resilience might delay any dovish pivot. Any signal that the Fed might tolerate higher inflation without cutting rates could push gold lower. Conversely, signs of concern about growth could reignite rate cut speculation and support gold.
Technical Analysis: Gold Holds Above Key Support, Eyes Fed Cues
From a technical standpoint, gold is showing resilience above $3,300, a level that has served as psychological and structural support over the past week. The absence of aggressive bearish momentum, despite Fed hawkishness, suggests underlying demand remains firm.
Immediate resistance: $3,330, followed by $3,345 (recent highs)
Support levels: $3,295 (recent low), $3,275 (50-day MA), and $3,240 (200-day MA)
Momentum indicators: RSI is neutral near 51, showing consolidation; MACD is flat, lacking direction
A decisive break above $3,345 could encourage bullish momentum toward $3,370 and $3,400. Conversely, failure to hold $3,295 may invite selling pressure toward $3,275 or lower.
Investor Sentiment: Institutions Stay Cautious, ETFs Remain Net Buyers
Despite volatile headlines, institutional flows into gold-backed ETFs have remained net positive, suggesting longer-term confidence in gold as a hedge against uncertainty. Hedge funds and speculative traders, on the other hand, appear more cautious, with futures positioning indicating reduced net longs since late June.
Investor caution is not unwarranted: the gold market remains highly sensitive to policy statements, geopolitical escalations, and inflation metrics. With Trump’s trade actions adding unpredictability and the Fed remaining data-dependent, volatility in gold could surge after the FOMC minutes.
Conclusion: Gold Needs a Catalyst Fed Minutes Could Provide It
The current backdrop for gold is one of conflicting pressures. On one side, inflation risks and a steady Fed restrain upside. On the other, trade fears, geopolitical turmoil, and USD fatigue support downside protection.
Unless the Fed pivots or Trump walks back tariffs, gold may remain in a sideways channel, driven by alternating macro headlines. However, Wednesday’s FOMC minutes could be the catalyst that breaks this stalemate. Any dovish signal or concern about tariffs may renew bullish bets, while further hawkish reinforcement could pressure XAUUSD below $3,295.
Until then, traders are likely to remain on the sidelines, making gold’s short-term path more dependent on central bank language than economic fundamentals.
Disclaimer: This blog is for informational purposes only and does not constitute financial advice. Always conduct your own research and consult a professional advisor before making investment decisions.
[sc_fs_multi_faq headline-0=”h2″ question-0=” Is gold still a good safe-haven investment in 2025?” answer-0=”Yes, especially given geopolitical risks, currency volatility, and rising trade barriers. However, short-term movements will be heavily influenced by Fed signals and USD trends.” image-0=”” headline-1=”h2″ question-1=”What are the key technical levels to watch for gold?” answer-1=”Resistance: $3,330 and $3,345. Support: $3,295 and $3,275. A break outside this range may signal a stronger directional move.” image-1=”” headline-2=”h2″ question-2=”Will the FOMC minutes impact gold prices?” answer-2=”Yes. If the minutes show the Fed is leaning dovish or is concerned about growth risks, gold may rally. If the Fed reinforces a hawkish stance, gold could drop below support.” image-2=”” count=”3″ html=”true” css_class=””]
