Gold Holds Below $3,365 as Inflation, Rate Risks, and Trump Tariffs Trigger Market Jitters

XAU/USD Struggles at $3,365 as CPI, Tariffs, and Fed Ambiguity Dominate

Gold (XAU/USD) continues to trade in a volatile but upward-sloping pattern, hovering just below key resistance at $3,365, having briefly touched $3,346.20 intraday. Despite hitting a 26% YTD gain and rallying nearly 38% year-over-year, bulls are facing headwinds from a firm US dollar, sticky inflation expectations, and uncertainty surrounding US trade policy. Tuesday’s modest uptick of 0.13% follows a sharper retreat from last week’s multi-month highs, underscoring growing hesitation as markets await clearer macro signals.

US June CPI Hits 2.7% YoY: Inflation Keeps Gold Bulls Cautious

The release of the US June Consumer Price Index (CPI) showed a 0.3% MoM increase and a 2.7% YoY headline print, in line with expectations but still far above the Fed’s 2% target. The core CPI came in at 3.0%, also unchanged, reinforcing that inflation remains entrenched. These figures have tightened expectations on rate cuts—markets now price in only a 60% chance of a cut by September, with just 50bps of easing forecast for the remainder of the year. This macro backdrop limits upside for non-yielding assets like gold, though any dovish Fed pivot could reignite bullish momentum.

Trump's Tariff Barrage Creates Inflation Risk, Supports Gold’s Safe-Haven Role

A major wildcard for gold remains the resurgence of trade war rhetoric. President Trump has imposed a 50% tariff on copper and threatened new 30% levies on EU and Mexico imports set to begin August 1. While he softened his stance Monday, the overhang of protectionism is pushing inflation expectations higher and rekindling safe-haven demand for gold. Over 20 countries have received formal trade warnings. Should these threats evolve into action, input costs will rise across sectors, making gold’s role as an inflation hedge more prominent.

Gold Demand Backed by Central Banks and China’s Institutional Buyers

Institutional demand remains resilient. Central bank buying, while off the 2022 record pace, continues to provide a solid floor. New entrants—particularly Chinese insurers and state-affiliated funds—are diversifying into gold as a buffer against global de-dollarization and yuan volatility. According to the World Gold Council, gold is now the second-largest foreign asset class held by China’s insurance sector. These flows are unlikely to fade in a geopolitical climate that remains unstable.

XAU/USD Technical Compression Signals Breakout Potential Toward $3,434

Technically, XAU/USD is locked in a tightening consolidation band, with immediate support at $3,341–$3,340 and resistance around $3,365–$3,366. A clear break above resistance opens the path to $3,400, and then the $3,434–$3,435 target zone. On the downside, if support breaks, the next defense lies at $3,326, followed by the key round level at $3,300 and the $3,282–$3,283 area. A sharper drop could test the July low of $3,247. The RSI is stable around 50, while Bollinger Band narrowing points to waning volatility—typically a precursor to a breakout. Market participants should watch for confirmation candles and volume before making directional bets.

Fed Split Widens as Powell Rumors Stir Markets

Minutes from the Fed’s latest meeting suggest a growing divide between policymakers. While most see the case for easing later in the year, some members remain hawkish due to fiscal expansion and labor market resilience. Complicating the outlook are rumors of a potential resignation from Fed Chair Jerome Powell, which—if substantiated—could alter expectations for leadership tone and direction. Though currently speculative, such an event would inject volatility into the bond and currency markets, indirectly lifting gold via safe-haven flows.

Correlations with USD and Yields Break Down as Gold Trades on Policy Optics

One of the more unusual dynamics in July is the temporary decoupling between gold and its typical inverses. The US dollar has strengthened over the past week, yet gold has remained firm. Likewise, US 10-year yields have rebounded after dipping, but this has not translated to immediate downside in gold. Even silver, which often tracks gold, rallied while gold stayed flat—underscoring how gold is now trading more on policy signals and macro themes than mechanical correlations.

XAU/USD Anchored by Sideways Structure, But Bulls Have Momentum Bias

Despite the choppiness, gold’s multi-week range—between $3,200 and $3,500—is gradually leaning bullish. Support at the 50-day EMA around $3,200 has held multiple times, forming a hard floor. If bulls break $3,500, a measured move projection targets $3,800, which aligns with Goldman Sachs’ forecast of $3,700 by year-end. This would represent a 40% increase from gold’s January 2 opening price of $2,633, underscoring the scale of gold’s long-term bullish thesis.

Retail Demand Eases but Physical Market Holds Strong via Jewelry and Recycling

Consumer demand has slightly moderated at current elevated prices, especially in India and Southeast Asia. However, this slack has been partially offset by increased recycling activity, as higher prices incentivize jewelry holders to liquidate. Even so, physical flows remain robust in the UAE, Turkey, and parts of Africa, where gold is also used as a monetary instrument amid inflation concerns.

XAU/USD Outlook Hinges on CPI-PPI Combo, Fed Path, and Trump Tariff Timeline

The next directional cue for XAU/USD will come from the combined impact of US CPI and PPI releases, expected to show continued upward price pressure. If both beat expectations, the dollar will likely surge and weigh on gold in the near term. If inflation data disappoints, traders may lean harder into rate cut bets, pushing gold above $3,365 and targeting $3,400. Trump’s tariff deadline on August 1 is another macro pivot point—if conflict intensifies, gold will rally; if it cools, consolidation could extend.

Verdict: BUY XAU/USD on Dips Toward $3,300–$3,326 With $3,434–$3,500 in Sight

The balance of risks still leans bullish. With central bank flows intact, ETF demand stable, geopolitical tensions elevated, and technical structure tight but constructive, dips toward $3,300 should be bought. Upside targets include $3,434, and a macro breakout above $3,500 would confirm momentum toward $3,700–$3,800 later in 2025. Stay cautious near resistance zones, but the dominant trade remains long.

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