The gold market faced renewed pressure at the start of the week, with prices sliding during Monday’s Asian session. A combination of improving risk appetite and subsiding geopolitical tensions weakened the appeal of the yellow metal as a safe-haven asset. Spot gold (XAU/USD) drifted below the $3,300 mark, touching a multi-week low as traders digested positive developments on the global trade front and awaited fresh cues from the Federal Reserve.
As of Monday morning, gold is struggling to find firm footing amid easing concerns over global conflicts and a surprise trade agreement between the United States and China on rare earth shipments. Simultaneously, the Israel-Iran ceasefire has contributed to risk-on market sentiment, prompting investors to rotate away from defensive assets like bullion. However, the prospect of more frequent Federal Reserve rate cuts later this year could act as a counterbalance and lend support to gold in the medium term.
Geopolitical Easing Undermines Gold’s Safe-Haven Demand
Geopolitics has historically been one of the strongest drivers of safe-haven flows into gold. However, two major developments over the past week have considerably reduced short-term geopolitical risks, pressuring gold lower:
1. US-China Trade Breakthrough
Markets reacted positively to the news that Washington and Beijing reached a trade agreement last week that would expedite rare earth exports to the United States. This is seen as a major step in alleviating tensions that had disrupted global supply chains for critical materials used in technology and defense manufacturing.
The deal, which also includes commitments to resume dialogue on broader trade issues, boosted investor confidence in the global economy and equity markets. As a result, traders unwound some of their bullish gold positions that had been built as a hedge against prolonged trade hostilities.
2. Israel-Iran Ceasefire Agreement
In another major geopolitical development, Israel and Iran reached a ceasefire agreement following weeks of rising military tensions in the region. While the ceasefire remains fragile and could unravel, the current lull has provided temporary relief to markets concerned about escalation in the Middle East.
Gold had benefited significantly from rising tensions in the region earlier this month, with prices surging on safe-haven demand. The reversal of this risk premium is now contributing to gold’s downside correction, with the market rebalancing in response to a more stable outlook.
Fed Policy in Focus: Will Dovish Shift Support Gold?
While geopolitical tensions have eased, macroeconomic signals from the United States are creating a supportive environment for gold from a monetary policy perspective.
Recent U.S. economic data suggest that the Federal Reserve may have room to cut interest rates more frequently and earlier than previously projected. In particular, softening consumer data and manageable inflation levels point toward a dovish policy stance in the second half of 2025.
Personal Spending and Income Drop in May
The U.S. Bureau of Economic Analysis reported on Friday that personal spending unexpectedly declined by 0.1% in May, marking the second monthly contraction this year. Meanwhile, personal income fell by 0.4%, the largest decline since September 2021. These figures signal that consumer demand, which has been a key driver of economic resilience, is showing signs of fatigue.
Inflation Data Remains Subdued
At the same time, inflation appears to be easing. The Fed’s preferred inflation gauge—the Personal Consumption Expenditures (PCE) Price Index—rose by 2.3% year-over-year in May, up slightly from April’s revised 2.2%, but broadly in line with market expectations. The core PCE index, which strips out food and energy prices, increased 2.7%, suggesting inflation remains sticky but not dangerously high.
On a monthly basis, the headline and core PCE numbers rose just 0.1% and 0.2% respectively, indicating that price pressures are not accelerating.
What This Means for Fed Policy
These figures strengthen the argument for the Fed to begin easing sooner, particularly as economic momentum slows and inflation stabilizes. Futures markets are now pricing in up to three rate cuts by December 2025, a notable shift from expectations earlier this quarter when only one cut was anticipated.
Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, thus making bullion more attractive to investors. If the Fed confirms a dovish shift through its upcoming commentary, this could create a tailwind for gold despite the current pullback.
Fedspeak Ahead: Markets Await Signals from Policymakers
The next major catalyst for gold could come from Federal Reserve officials scheduled to speak later on Monday. Atlanta Fed President Raphael Bostic and Chicago Fed President Austan Goolsbee are due to deliver remarks that traders hope will clarify the central bank’s near-term outlook.
Atlanta Fed’s Bostic
Bostic has previously emphasized the need for policy caution, suggesting that disinflation gives the Fed “space to be patient” with rate adjustments. However, his recent comments also acknowledged downside risks to growth, hinting at flexibility if consumer spending continues to weaken.
Chicago Fed’s Goolsbee
Goolsbee has taken a more dovish tone in recent weeks, suggesting that tariffs and global tensions are unlikely to fuel runaway inflation. He’s argued for a balanced approach, supporting rate cuts if economic softness becomes entrenched.
If either policymaker signals that the Fed is preparing to respond proactively to a slowdown, gold could find renewed buying interest. Conversely, any hawkish surprises might prolong the current correction.
Technical Analysis: XAUUSD Faces Crucial Support
From a technical standpoint, gold is testing a critical support zone that could determine its direction over the coming weeks. After failing to hold above $3,300, spot gold is hovering near $3,250—a level that marks the 38.2% Fibonacci retracement of the March–June rally.
Key Support Levels
$3,250: Near-term support, tested during Monday’s Asian session
$3,200: Psychological round number and 100-day moving average
$3,100: Deeper support area last seen in early April
Key Resistance Levels
$3,330: Recent intraday high; also aligns with the 21-day EMA
$3,375: Resistance from mid-June breakdown; upper bound of descending triangle
$3,400: Psychological barrier and longer-term breakout target
Technical indicators show momentum remains bearish in the short term, with the Relative Strength Index (RSI) on the four-hour chart dipping below 40. However, oversold conditions may soon trigger a relief bounce, especially if Fed commentary turns dovish.
A break below $3,250 could open the door to $3,200 or even $3,100, while a strong rebound and close above $3,330 would neutralize bearish momentum and potentially re-establish a bullish trend.
ETF Holdings and Futures Positioning
Market positioning also reflects the recent shift in sentiment. According to the Commodity Futures Trading Commission (CFTC), speculative net-long positions in gold futures have declined by 14% over the past two weeks. This suggests traders are taking profits or hedging against a deeper correction.
Meanwhile, gold-backed exchange-traded funds (ETFs) saw only minor outflows, indicating that long-term investors are not yet abandoning their positions. This divergence between futures and ETFs suggests the current pullback is being driven more by short-term traders than structural shifts in gold demand.
Physical gold demand, especially in Asia, remains relatively resilient. Reports from India suggest increased interest from jewelry buyers ahead of the upcoming festival season. If spot prices continue to dip, physical demand could provide a floor to prices.
Macro Calendar: Key Events to Watch This Week
Gold traders should keep an eye on the following events, which could shape market expectations for Fed policy and influence the direction of gold:
Monday (June 30): Speeches by Fed’s Bostic and Goolsbee
Tuesday (July 1): ISM Manufacturing PMI – Weak data could support gold
Wednesday (July 2): FOMC Minutes – Insight into the Fed’s June meeting and outlook
Friday (July 4): Non-farm Payrolls – Consensus at +170K; a downside miss could accelerate rate-cut expectations
Additionally, any news about escalation in geopolitical tensions—whether in the Middle East or regarding trade tariffs—could rapidly change gold’s trajectory.
Conclusion: Gold Faces a Tug-of-War Between Risk Appetite and Monetary Easing
The gold price has entered a consolidation phase, caught between fading geopolitical risks and rising expectations of Fed easing. While the ceasefire between Israel and Iran and a rare-earth trade agreement between the U.S. and China have reduced safe-haven demand, weaker U.S. consumer data and a dovish Fed backdrop may soon tilt the balance back in favor of gold bulls.
The technical setup suggests that $3,250 is the battleground for short-term direction. A sustained break below this level would invite further selling, potentially targeting $3,200 or lower. On the other hand, a dovish shift in tone from Fed speakers could trigger a rebound, with initial resistance at $3,330 and further upside possible if global uncertainties re-emerge.
In this fluid environment, gold investors must weigh the prospect of near-term weakness against longer-term support from falling interest rates and persistent macroeconomic fragilities.
