Tariff Block Triggers Risk Rally, Erodes Bullion’s Safe-Haven Appeal
Gold prices (XAU/USD) dipped for the fourth consecutive day on Thursday, continuing a bearish streak that has taken the metal to its lowest level in more than a week. During the Asian session, prices dropped to the $3,246–$3,245 region before modestly paring losses as broader market sentiment recalibrated. Despite the rebound, gold remains in the red, pressured by a surge in investor optimism after a US federal court blocked President Donald Trump’s global tariff initiative.
The court ruling marked a significant development in the trade policy landscape, with immediate implications for global markets. Equities rallied sharply in response, as investors priced in a lower probability of a prolonged tariff war. This risk-on sentiment has dulled demand for traditional safe-haven assets like gold, accelerating the metal’s decline this week.
Stronger US Dollar Tightens the Screws on XAU/USD
The hawkish tone in Wednesday’s Federal Open Market Committee (FOMC) Minutes added fuel to the US Dollar’s rally, compounding the pressure on gold. The Dollar Index (DXY) climbed above the 100-mark as markets responded to the Fed’s cautious stance on policy loosening, at least in the near term. Fed officials emphasized the need for more clarity on the economic effects of recent policy changes before making further moves on interest rates.
This narrative of patience from the Fed has reinforced the strength of the greenback, which remains a key headwind for gold prices. As the USD rallies, the opportunity cost of holding non-yielding bullion increases, prompting a shift in allocation away from the yellow metal.
Geopolitical Undercurrents Keep Floor Beneath Gold Prices
Despite the risk-on rally and stronger dollar, not all safe-haven demand for gold has vanished. Several geopolitical flashpoints continue to support underlying bids. The ongoing tensions between the United States and China remain a source of market anxiety. Reports indicate that the Trump administration is preparing to impose restrictions on US exports of critical technologies — including semiconductor manufacturing equipment and specialty chemicals — to China. This adds a fresh layer of complexity to bilateral trade relations, even after the tariff block.
Meanwhile, in the Middle East, Israel carried out a second round of airstrikes in Yemen this month, targeting positions of the Houthi rebel group in response to recent missile attacks. In Eastern Europe, Russia’s renewed offer to hold peace talks with Ukraine in Istanbul signals diplomatic movement, but geopolitical uncertainty persists as demands for a NATO non-expansion pledge complicate negotiations.
Such developments continue to support some defensive positioning in gold, preventing a deeper collapse in XAU/USD, even as broader market forces remain unfavorable.
Fed’s Cautious Stance Leaves Market in Limbo
The May FOMC Minutes underscored a consensus within the Federal Reserve to keep interest rates unchanged while assessing the effects of recent economic shifts. While the Fed is not outrightly hawkish in its forward guidance, its reluctance to commit to a dovish turn in policy has created a wait-and-see mode in markets.
This ambiguity has added to USD strength and weakened demand for gold. However, many investors are still betting on a rate cut cycle resuming in the latter half of 2025. Such expectations have helped cushion gold’s downside, even if they haven’t yet triggered a strong bullish reversal.
The minutes also referenced concerns over US fiscal conditions, which have begun to loom larger in the market psyche. With the national debt ballooning and the fiscal deficit widening, long-term inflation risks could resurface, potentially rekindling interest in gold as a hedge.
Economic Calendar to Drive Next Leg in Gold Price Action
Looking ahead, traders will be watching Thursday’s US data releases for fresh directional cues. Key reports include the Preliminary Q1 GDP print, Initial Jobless Claims, and Pending Home Sales. These datasets will be closely analyzed for any signs of economic slowdown or resilience that could affect Fed policy expectations.
However, the spotlight is firmly on Friday’s release of the Core Personal Consumption Expenditures (PCE) Price Index — the Fed’s preferred inflation gauge. Any surprise in the PCE print could significantly sway the US Dollar and, by extension, gold prices.
A stronger-than-expected inflation print may reinforce expectations that the Fed will hold rates higher for longer, which would weigh on gold. Conversely, softer data could breathe life into the metal by reviving hopes of policy easing.
What’s Behind the Recent Drop in Gold Prices?
1. Trump’s Tariff Block Ignites Risk-On Mood
The catalyst for the latest leg down in gold came from an unexpected judicial intervention. A federal court ruled that President Trump lacked the authority to impose sweeping tariffs on global imports under the banner of “Liberation Day.” The decision was interpreted as a sign that institutional checks remain in place, reducing the probability of a major trade disruption.
Markets responded with a rally in equities, reducing the urgency to hold gold as a safe-haven asset. The improved risk appetite has accelerated gold’s slide, even as geopolitical risks linger in the background.
2. Fed’s Hawkish Tone Boosts the Dollar, Hurts Gold
The Federal Reserve’s May meeting minutes, released on Wednesday, revealed a cautious but firm commitment to keeping interest rates elevated for now. The commentary pointed to a desire for more data before making changes, dashing hopes of an imminent rate cut.
This has bolstered the US Dollar, making gold less attractive in comparison. Investors are now recalibrating their timelines for potential Fed easing, which remains a critical variable for gold’s medium-term trajectory.
3. Geopolitical Risks Act as a Safety Net for Gold Bulls
Amid the bearish headlines, some investors are still finding reasons to stay invested in gold. The US-China tech war, Middle Eastern hostilities, and Ukraine-Russia tensions continue to create an uneasy global environment. These geopolitical risks are keeping gold from collapsing entirely, even as short-term technicals remain bearish.
Moreover, the Fed’s concern over fiscal policy risks has nudged some participants back into gold as a longer-term hedge, even if the near-term trend is down.
Technical Snapshot: Caution Ahead for XAUUSD Bulls
From a technical standpoint, gold’s break below the $3,260 level has shifted momentum to the downside. The intraday bounce from the $3,245 area may offer temporary relief, but the lack of conviction in buying suggests that the path of least resistance remains lower.
Support is now seen near $3,240, with a sustained move below this level potentially opening the door to $3,220 and then $3,200. On the upside, any recovery must clear $3,280 decisively to suggest that the recent downtrend is exhausted. For now, rallies are likely to face selling pressure amid a stronger dollar and calmer equity markets.
Conclusion: Gold Caught Between Fundamentals and Fear
Gold prices remain under duress, weighed down by renewed optimism in equity markets and the US Dollar’s bullish momentum. While geopolitical uncertainty and fiscal concerns are offering some support, they are insufficient to reverse the metal’s bearish short-term trajectory.
Traders will now shift their focus to upcoming economic data, particularly the PCE inflation report, for confirmation of where the Fed — and gold — are headed next.
