The gold price (XAU/USD) is under mild pressure in the early Tuesday Asian trading session, as it pulls back from a multi-week high near $3,400, driven by a modest US Dollar (USD) rebound. Despite this dip, bearish momentum remains limited, and the lack of aggressive follow-through selling suggests that bulls still maintain a foothold in the market.
Several key macroeconomic and geopolitical factors continue to underpin support for the yellow metal, even as risk sentiment shows modest improvement. Vestronmix brokers take a deep dive into this matter within the published piece.
Modest USD Recovery Caps Gold’s Upside, But Lacks Conviction
Gold’s retreat is largely attributed to a modest recovery in the USD, which bounced off a six-week low. The rebound reflects some profit-taking after the greenback’s recent weakness and is coupled with a mildly positive risk tone across Asian equity markets.
However, the US Dollar’s recovery lacks fundamental conviction due to widespread expectations of interest rate cuts by the Federal Reserve and persistent fiscal concerns surrounding the US economy.
The non-yielding nature of gold typically benefits from a weaker USD, and with Fed rate cut bets firming for 2025, there’s a prevailing cap on any sustained USD strength. Dovish rhetoric from several Fed officials, combined with inflation data showing signs of cooling, supports the narrative that policy easing is on the horizon.
Rising Geopolitical Tensions Keep Safe-Haven Demand Alive
Even as risk assets gain temporary traction, geopolitical tensions are escalating, keeping the safe-haven appeal of gold intact. Renewed US-China trade tensions are back in focus, as the US President accused China of violating a tariff agreement, raising fears of a trade war revival.
The administration’s push to increase steel import tariffs and demand swift trade concessions by Wednesday adds further uncertainty to the global trade outlook.
In parallel, the Russia-Ukraine conflict remains unresolved. The latest peace talks in Istanbul concluded without progress, while Ukraine’s drone strikes over the weekend were described by the Ukrainian President as successful. These developments stoke geopolitical instability, bolstering gold’s appeal as a hedge against geopolitical shocks.
Market Eyes Fed Path and Fiscal Health as Key Drivers
Despite the intraday pullback in gold, Fed commentary has injected fresh momentum into the rate cut narrative. Fed Governor Christopher Waller reiterated that rate cuts remain possible even if tariff-induced inflation reemerges temporarily. Chicago Fed President Austan Goolsbee further reinforced this by suggesting interest rates could start declining over the next 12 to 18 months.
Although Dallas Fed President Lorie Logan urged caution, emphasizing patience, the broader market remains inclined toward the expectation of two 25-basis-point cuts this year. At the same time, deteriorating US fiscal metrics, rising debt levels, and budget deficits, fuel the potential for a “sell America” sentiment, weighing further on the USD and favoring gold.
The upcoming JOLTS Job Openings report and Nonfarm Payrolls (NFP) data will be pivotal in shaping short-term expectations for both the Fed’s policy path and the USD’s trajectory, which will inevitably impact XAU/USD direction.
Gold Price Technical Setup: Supportive of Dip-Buying
Technically, the XAU/USD pair breached the $3,324–$3,326 resistance last session and even climbed above the $3,355 mark, now acting as support. The relative strength indicators (RSI) and momentum oscillators across daily and hourly timeframes remain firmly in bullish territory, signaling that the path of least resistance remains upward.
Any decline below the $3,355 support is likely to attract dip-buying interest, with additional demand anticipated around the $3,326–$3,324 zone. Should this support band fail to hold, further downside may target the $3,300 handle, followed by the $3,286–$3,285 horizontal support, which could act as a stronger floor.
Conversely, to reignite bullish momentum, gold bulls must push the price beyond the $3,400 psychological level. A clean break above this threshold could open the door to a move toward $3,430–$3,432 resistance, and ultimately, a retest of April’s all-time high, with an ambitious goal of challenging the $3,500 mark.
Market Outlook: Gold Holds Firm Despite Headwinds
In the broader context, gold prices remain underpinned by a unique mix of macro uncertainty, central bank policy expectations, and geopolitical instability. While short-term fluctuations are inevitable, especially around key technical levels and event-driven releases like the NFP, the structural factors supporting gold remain largely intact.
The lack of follow-through selling despite the USD’s intraday bounce suggests that traders are hesitant to abandon long positions, especially with fiscal risks, rate cut prospects, and global tensions persisting. As a result, any dips below multi-week highs are likely to be viewed as buying opportunities rather than signals of a trend reversal.
Conclusion
In conclusion, while gold has pulled back modestly from recent highs, its underlying bullish bias remains supported by both fundamental and technical factors. Traders will closely watch incoming US data and Fed communications for fresh directional cues.
For now, gold appears well-positioned to weather short-term volatility, with the potential to climb toward new highs if key resistance levels are breached.
