Gold Price Pauses Rally Around $3,380 Ahead of Fed Policy Shift and Tariff Announcements
XAU/USD slips 0.1 percent after touching a three-week high, as investors weigh 87 percent odds of a September rate cut against rising U.S. import duties | That's TradingNEWS
Global Risk Sentiment and XAU/USD Dynamics
U.S. stock indices remained buoyant as the S&P 500 rose to 6,341.93 (+0.68 percent) and the Nasdaq Composite advanced to 21,121.30 (+0.98 percent), emboldening risk-on positioning that spilled into commodities. Despite equities’ rally, gold’s safe-haven allure persisted, with spot gold (XAU/USD) hovering at $3,378.21 per ounce after touching an intraday peak of $3,390. The U.S. dollar’s slight retreat—off 0.33 percent to 95.47 on the Dollar Index—provided a modest tailwind for bullion, even as 10-year U.S. Treasury yields inched up to 4.236 percent. The juxtaposition of equity strength and mild dollar softness underscores gold’s dual role as both a risk hedge and an inflation proxy.
Fed Rate-Cut Expectations and Inflation Signals
Friday’s weaker-than-forecast U.S. services PMI of 50.1—the lowest in over a year—alongside underwhelming nonfarm payrolls have lifted CME FedWatch odds of a September rate cut to 87 percent from 63 percent earlier this week. With gold paying zero interest, every one basis-point decline in Fed terminal rate expectations enriches bullion’s relative appeal. Yet sticky headline inflation—next week’s CPI reading will be squarely in the spotlight—remains a countervailing force. Should CPI surprise to the upside, gold could face renewed headwinds, given that markets have already priced in easing to a significant degree.
Technical Landscape Steering XAU/USD
Gold’s chart formations paint a picture of consolidation within a symmetrical triangle, with converging 20-, 50-, and 100-period EMAs clustered between $3,323 and $3,360. The critical resistance at $3,400 has capped upside attempts thrice in the past week, while immediate support sits near $3,350—reinforced by the 20-period SMA on the four-hour chart—and a secondary floor at $3,320. Momentum oscillators remain neutrally poised, with RSI languishing around 51, suggesting neither side has claimed decisive control. A daily close above $3,440—the July high—would validate bullish continuation toward $3,500, whereas a break below $3,320 risks an extended slide toward the May 15 trough of $3,121.
ETF Demand, Physical Flows and Chinese Arbitrage
Institutional demand patterns reveal gold ETFs absorbing significant inflows even as retail offtake wanes. U.S. consumer demand fell 34 percent quarter-over-quarter to 124 tons, yet ETF holdings surged 110 percent year-over-year, underscoring a rotation into passive vehicles. In China, registered warehouse stocks against Shanghai Futures Exchange contracts spiked to a record 36 tonnes, fueled by arbitrageurs exploiting the futures-spot contango. This duality—robust ETF accumulation in the West and spot-market integration in the East—creates a structural underpinning that may cap downside even during tactical pullbacks.
Geopolitical Tariffs and Safe-Haven Gravitas
President Trump’s threat to impose additional levies on semiconductor and pharmaceutical imports, coupled with the looming crackdown on Indian oil purchases, injects fresh supply-chain uncertainty and inflationary bias. Tariff pressure has already pushed average U.S. import duties to 15.2 percent from 2.3 percent in 2024, stoking stagflation fears that historically buoy gold. As global trade frictions intensify and Federal Reserve leadership uncertainty mounts—Powell’s successor shortlist has narrowed to four candidates—gold’s insurance premium against policy missteps and geopolitical blow-ups remains elevated.
Strategic Positioning: Hold
Given the confluence of robust technical support at $3,350–$3,320, elevated Fed easing expectations, and persistent ETF accumulation, bullion retains a constructive medium-term outlook. However, the $3,400 barrier and the unresolved CPI trajectory warrant caution. A neutral posture is warranted until gold either convincingly clears $3,440 on a sustained basis or retraces below $3,320, at which point the broader consolidation would shift bearish. Accordingly, a Hold stance balances the competing forces of central bank dovishness, geopolitical risk, and technical congestion around key price thresholds.
