The gold price (XAUUSD) is facing headwinds after a solid four-day rally that pushed it to a near two-week high. On Wednesday, bullion slipped into negative territory during the early European session as investors embraced a risk-on tone, driving flows into equities and away from traditional safe havens like gold.
This sentiment shift followed weak US macro data, particularly Friday’s disappointing Nonfarm Payrolls and Tuesday’s lackluster ISM Services PMI. While these signals suggest economic vulnerability, equity markets responded positively, pricing in the growing likelihood of interest rate cuts from the US Federal Reserve an outcome that could ultimately support gold.
US Macro Data Paints a Worrying Picture
Friday’s US NFP report showed the labor market is cooling faster than expected, with only modest job additions and downward revisions to previous data. Meanwhile, wage growth slowed, and labor force participation dipped—signs that the world’s largest economy might be losing steam.
Services Sector Slumps to the Brink
Tuesday’s ISM Services PMI came in at 50.1 for July, barely clinging to expansion territory and down from 50.8 in June. More worryingly, subcomponents like the Employment Index dropped to 46.4, marking deep contraction, and New Orders slowed to 50.3, indicating weakening demand.
These soft data prints bolster the case for monetary easing by the Fed and have kept the US Dollar (USD) on the back foot despite brief upticks, offering a partial offset to gold’s losses.
Fed Rate Cut Bets Offer Cushion for Gold
Traders now strongly anticipate that the Federal Reserve will begin cutting rates in September. Futures markets are pricing in a near 70% chance of a 25-basis-point cut, with odds increasing for at least two rate cuts by year-end. These expectations stem not just from soft data, but also rising trade tensions and political uncertainty under President Trump.
A dovish Fed typically weighs on the USD and boosts non-yielding assets like gold. As such, while the yellow metal is facing some intraday weakness, downside potential remains limited unless economic data surprises to the upside or Fed officials signal resistance to near-term easing.
Geopolitical Tensions Remain a Tailwind
President Donald Trump has re-ignited trade concerns by confirming that tariffs on semiconductor and pharmaceutical imports will be imposed within the coming days. This follows prior levies on cars, auto parts, steel, and aluminum highlighting a return to protectionist policies as the US approaches its election cycle.
These aggressive moves risk undermining global supply chains and may spur retaliatory measures from key trading partners, especially China and the European Union. As a result, risk sentiment remains fragile and investors may seek refuge in gold as a hedge against escalating trade conflict.
No Key Data on Deck, All Eyes on FOMC Commentary
With no significant US economic releases scheduled for Wednesday, traders will turn their focus to comments from Federal Open Market Committee (FOMC) members. Any dovish tilt could reinforce existing rate cut expectations and renew buying interest in gold.
Meanwhile, the broader market will monitor risk sentiment driven by equity performance, geopolitical headlines, and anticipation for next week’s US inflation data. Until then, gold may remain rangebound, with traders looking for clearer direction.
Technical Analysis: Gold Holds Key Support Despite Intraday Dip
Gold is currently trading just below its recent two-week high but remains well above near-term support at $3,275. Here are the key technical levels to watch:
Immediate Resistance: $3,300 psychological mark and recent peak
Support Levels: $3,275 (20-day EMA), followed by $3,255 (50-day EMA)
Trend Bias: Still bullish as long as XAU/USD holds above $3,250
If Fed dovishness intensifies or risk appetite fades, gold could quickly retest and potentially break above the $3,300 barrier. However, a surprise hawkish turn or strong inflation data next week may open room for a pullback toward $3,250 or lower.
Market Sentiment: Mixed But Cautiously Bullish
The current setup presents a classic tug-of-war:
Bearish Pressure:
Positive equity sentiment
Mild USD uptick
Lack of immediate macro data
Bullish Support:
Fed rate cut expectations
Weak macro backdrop
Renewed trade war concerns
This mix suggests consolidation is likely in the short term, with bulls looking for confirmation from Fed speakers or weak inflation prints to drive the next leg higher.
Gold Eyes $3,350 if Fed Delivers
With monetary easing now the base case, and geopolitical risks brewing in the background, gold’s overall outlook remains constructive. However, short-term gains may be limited unless fresh catalysts emerge.
If next week’s CPI data confirms disinflation trends and FOMC members strike a dovish tone, the XAUUSD pair could rally toward $3,325 and possibly $3,350. Conversely, if risk-on sentiment extends or Fed comments disappoint, a retracement to $3,250 or even $3,220 could unfold.
Conclusion: Gold Awaits the Next Spark Amid Mixed Macro Landscape
The gold market is currently pausing after a strong rally, digesting mixed macroeconomic signals and awaiting further guidance from central bankers. Despite today’s dip, bullish undercurrents primarily Fed rate cut expectations and trade uncertainty remain intact.
Traders should stay cautious in the near term, but the broader narrative still supports dips being bought, especially if the US Dollar remains under pressure and risk sentiment sours.
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=”Why is the gold price falling today?” answer-0=”Gold is slipping due to improved risk sentiment and a modest USD recovery, which is reducing demand for safe-haven assets.” image-0=”” headline-1=”h2″ question-1=”Will Fed rate cuts support gold prices?” answer-1=”Yes, lower interest rates weaken the US Dollar and reduce opportunity cost for holding gold, usually boosting gold demand.” image-1=”” headline-2=”h2″ question-2=”Is gold still in an uptrend?” answer-2=”Technically, yes. As long as XAU/USD holds above the $3,250–$3,275 support zone, the uptrend remains intact.” image-2=”” count=”3″ html=”true” css_class=””]
