Gold (XAUUSD) is trading lower during Thursday’s early European session, easing from a three-week peak of around $3,400 per ounce. The decline follows a rebound in the US Dollar Index (DXY) and profit-taking by traders after recent gains. Despite the pullback, concerns over the Federal Reserve’s autonomy continue to provide a floor for the precious metal, reinforcing its status as a safe-haven asset during policy uncertainty.
Trump vs. Fed: Political Uncertainty Boosts Safe-Haven Demand
Market nerves were rattled after US President Donald Trump fired Fed Governor Lisa Cook, citing mortgage borrowing misconduct a move that many analysts argue could undermine central bank independence.
John Williams, President of the New York Fed, stressed the importance of keeping monetary policy free from political influence.
Lisa Cook has vowed to challenge her dismissal in court, arguing that the president has no legal authority to remove a sitting Fed governor.
This unprecedented clash has amplified institutional trust risks, encouraging investors to seek safety in gold despite a stronger dollar backdrop.
Focus Shifts to US GDP and PCE Inflation Data
Investors are now bracing for key macroeconomic indicators:
Q2 GDP Estimate (Thursday): Markets expect a growth rate of 3.1%. A stronger-than-expected print could strengthen the US Dollar, pressuring gold in the short term.
PCE Inflation (Friday): Often viewed as the Fed’s preferred inflation gauge, this release will offer critical clues about the timing and magnitude of upcoming rate cuts.
If inflation readings surprise on the upside, analysts like Jim Wyckoff of Kitco Metals warn that expectations for a September rate cut could be tempered, weighing further on gold prices.
Fed Rate Cut Odds Remain High
Despite the political drama, Fed funds futures tracked by the CME FedWatch tool suggest an 87% chance of a 25 bps rate cut in September.
This expectation keeps gold supported, as lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, making it more attractive for both institutional and retail investors.
Technical Outlook
From a technical perspective:
Immediate Support: $3,360
Next Key Support: $3,320
Resistance Levels: $3,400 followed by $3,430
Momentum indicators suggest that while the short-term trend is cooling, the medium-term bias remains bullish unless gold breaks below the $3,320 support zone.
Market Sentiment
Kyle Rodda, a financial market analyst at Capital.com, highlighted ongoing interest in gold due to “institutional trust risks and uncertainty around the Fed’s autonomy,” suggesting that dips could attract fresh buying interest, especially from long-term investors.
What’s Next for Gold Traders
Thursday: US Q2 GDP
Friday: US PCE inflation data
September: Fed’s policy meeting rate cut decision
If data aligns with expectations, gold could consolidate near current levels. However, surprises in either direction could spark sharp price swings.
Conclusion
Gold prices have taken a breather after touching a three-week high, as a resurgent US Dollar and profit-taking pressure weighed on the yellow metal. However, political uncertainty surrounding the Federal Reserve continues to offer a safety net for gold, keeping investors cautious ahead of key US data releases.
The upcoming Q2 GDP estimate and PCE inflation report are set to be pivotal in shaping near-term price action. A stronger GDP or higher-than-expected inflation could bolster the dollar and pressure gold, while softer data may rekindle bullish momentum. For now, gold traders are adopting a wait-and-see approach, balancing profit-taking with the potential for renewed safe-haven demand.
