Gold Holds Firm Below One-Week High as Traders Eye US Economic Data for Clarity.
Gold (XAUUSD) traded in a narrow range on Thursday, hovering just below the one-week high it reached on Wednesday. Although the yellow metal initially slid to the $3,338 mark during the early European session, it quickly attracted dip-buyers who seized the opportunity to reenter the market amid a supportive macro backdrop. The precious metal’s ability to rebound reflects enduring bullish sentiment, supported by geopolitical tensions, ongoing trade uncertainty, and dovish expectations from the US Federal Reserve (Fed).
While positive news surrounding US-China trade discussions briefly buoyed sentiment, that optimism was short-lived. US President Donald Trump reignited fears of a global trade conflict by threatening to impose unilateral tariffs within the next two weeks, undercutting the initial rally in risk assets. In this risk-averse climate, gold continues to serve as a safe-haven asset of choice.
Fed Dovishness Continues to Undermine the US Dollar
One of the central drivers behind gold’s resilience has been the dovish outlook for US monetary policy. The US Dollar, which traditionally moves inversely to gold, has struggled to maintain traction and now trades near its lowest level since late April. This weakness is largely tied to expectations that the Federal Reserve will initiate rate cuts as early as September.
The Bureau of Labor Statistics (BLS) reported on Wednesday that the headline Consumer Price Index (CPI) rose by only 2.4% in May on an annualized basis, falling short of the 2.5% forecast. Core inflation, which excludes food and energy, remained unchanged at 2.8% from the previous month. The softer-than-expected CPI data has reinforced market expectations that inflation is stabilizing and does not warrant further monetary tightening.
Fed fund futures now price in a 70% chance of a 25-basis-point rate cut by September, up sharply from 57% before the CPI release. As rate expectations shift, yields on US Treasury securities have also fallen, diminishing the opportunity cost of holding non-yielding assets like gold and lending further support to its price.
Geopolitical Risks Bolster the Safe-Haven Appeal of Gold
Beyond inflation and monetary policy, gold is also drawing strength from growing geopolitical instability. The Middle East remains a flashpoint for global tensions. Iran’s Defense Minister Aziz Nasirzadeh issued a stark warning, threatening retaliatory strikes against US bases should conflict break out over its nuclear program. In response, the US ordered some staff to evacuate its Baghdad embassy and allowed military families to voluntarily leave American bases in the region.
Simultaneously, the war in Eastern Europe is intensifying. Russia launched a new wave of drone attacks on Kharkiv, Ukraine’s second-largest city, in what it described as retaliatory strikes. These events not only fuel broader market anxiety but also bolster demand for gold as a defensive hedge.
Historically, geopolitical flashpoints have served as a catalyst for surging gold prices, and 2025 appears to be no different. As tensions flare on multiple fronts—from Eastern Europe to the Middle East—investors are increasingly turning to the yellow metal to shield portfolios from geopolitical shocks.
Trade Tensions Undermine Risk Sentiment Despite Initial Optimism
Earlier this week, traders found momentary relief in reports that US-China trade talks in London had yielded positive progress. Both sides agreed in principle to ease export controls and create a framework for further cooperation. However, that sense of relief quickly evaporated following Trump’s combative remarks on Wednesday.
Trump announced that he would set unilateral tariff rates and notify trading partners within two weeks. This sudden policy pivot added another layer of uncertainty to an already fragile truce between the world’s two largest economies. The ripple effect was immediate: risk assets lost momentum, and safe-haven instruments, including gold, attracted renewed interest.
The back-and-forth nature of the US-China relationship, particularly under Trump’s leadership, has contributed to erratic risk sentiment and boosted gold’s appeal as a stabilizing asset amid shifting global trade dynamics.
Technical Picture: Gold Maintains Bullish Structure
Technically, the gold price remains well-supported above key moving averages and continues to post higher lows on the daily chart. Wednesday’s peak near $3,355 represents the immediate resistance zone, and a decisive move above that level could open the door for a test of the yearly high near $3,375.
On the downside, the $3,338 area—where gold found buyers during Thursday’s dip—now acts as strong intraday support. A break below this level could expose the next support at $3,320, but the broader bullish trend remains intact unless gold falls below $3,300.
Momentum indicators, including the RSI and MACD, remain in bullish territory, indicating that buyers still maintain control of the trend. As long as gold holds above its 21-day moving average, currently located around $3,315, dip-buying is likely to continue.
All Eyes on US PPI and Jobless Claims for Short-Term Direction
With the CPI data already reinforcing Fed dovishness, the focus now turns to Thursday’s release of the US Producer Price Index (PPI) and Initial Jobless Claims. The PPI offers additional insight into upstream inflationary pressures and could influence expectations for future consumer prices.
If the PPI also shows signs of cooling, it may amplify expectations for Fed rate cuts and trigger another wave of USD weakness—supportive for gold prices. Similarly, if jobless claims rise unexpectedly, it could suggest a weakening labor market, adding another reason for the Fed to consider policy easing sooner rather than later.
On the other hand, if either PPI or jobless claims data surprises to the upside, it may temporarily dampen rate-cut enthusiasm and trigger a modest pullback in gold. However, the broader trend still favors upside given the confluence of supporting factors.
Gold Outlook: Bullish Momentum Intact Amid Macro and Geopolitical Headwinds
Despite occasional intraday pullbacks, gold continues to benefit from a favorable combination of factors. Softening inflation, increased Fed rate cut expectations, geopolitical instability, and renewed trade tensions are aligning to create a supportive environment for precious metals.
With the USD subdued and market volatility likely to persist, the path of least resistance for gold appears to be to the upside. As long as risk-off sentiment persists and the Fed remains dovish, gold is likely to remain in favor among institutional investors and retail traders alike.
